PR 23-3A. Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis OBJ. 3, 4 Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 40,000 units of product were as follows: Standard Costs Actual Costs Direct materials 120,000 lb. at $3.20 118,500 lb. at $3.25 Direct labor 12.000 hrs. at $24.40 11,700 hrs. at $25.00 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 15,000 direct labor hrs.: Variable cost, $8.00 $91,200 variable cost Fixed cost, $10.00 $150,000 fixed cost Each unit requires 0.3 hour of direct labor. INSTRUCTIONS Determine (a) the direct materials price variance, direct materials quantity variance, and total direct materials cost variance; (b) the direct labor rate variance, direct labor time variance, and total direct labor cost variance; and (c) the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. Factory Overhead Cost Variance Variable factory overhead controllable variance: Actual variable FO cost incurred $ 91,200 Budgeted variable FO cost for 12,000 hrs. 96,000 Variance favorable 15,000 Fixed factory overhead volume variance: Hours at normal capacity Standard hours for amount produced Productive capacity not used Standard fixed FO cost rate Variance $10.00 unfavorable Total factory overhead cost variance unfavorable Alternative Computation of Overhead Variances: Factory Overhead Actual costs Balance Applied costs Actual Factory Overhead Applied Factory Overhead Budgeted Factory Overhead for Amount Produced Variable cost Fixed cost Total Controllable Variance Volume Variance Total Factory Overhead Cost Variance a. Direct Materials Cost Variance Price variance: Actual price (per Ib.) $3.25 Standard price (per lb.) 3.20 Variance Actual quantity (lb.) 118,500 Direct materials price variance $ 5,925 unfavorable 118,500 120,000 Quantity variance: Actual quantity (lb.) Standard quantity (Ib.) Variance Standard price Direct materials price variance X $3.20 (4,800) favorable Total direct materials cost variance $ 1,125 unfavorable b. Direct Labor Cost Variance $25.00 24.40 Rate variance: Actual rate per hour Standard rate per hour Variance Actual hours Direct labor rate variance X 11,700 7,020 unfavorable 11,700 12,000 Time variance: Actual direct labor hours Standard direct labor hours Variance Standard rate per hour Direct labor time variance $24.40 (7,320) favorable Total direct labor cost variance $ (300) unfavorable