Problem 1:

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Eastern Polymers, 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 5,600 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	7,800 lbs. at $4.60		7,700 lbs. at $4.50
Direct labor	1,400 hrs. at $16.70		1,430 hrs. at $16.90
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 1,460 direct
	labor hrs.:
		Variable cost, $3.90	$5,410 variable cost
		Fixed cost, $6.20	$9,052 fixed cost

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Problem 2:

L'Essence Cosmetics Company is planning a one-month campaign for June to promote sales of one of its two cosmetics products. A total of $80,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 19,000 additional units of moisturizer or 16,000 additional units of perfume could be sold without changing the unit selling price of either product.

1. Prepare a differential analysis as of June 15, 2014, to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter zero "0".

Price variance Quantity variance Total direct materials cost variance Favorable - Favorable Favorable