# Direct Materials, Direct Labor

eBook

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

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 74,000 units of product were as follows:

 Standard Costs Actual Costs Direct materials 229,400 lbs. at \$4.70 227,100 lbs. at \$4.60 Direct labor 18,500 hrs. at \$18.20 18,930 hrs. at \$18.40 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 19,310 direct labor hrs.: Variable cost, \$3.30 \$60,440 variable cost Fixed cost, \$5.20 \$100,412 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 the variable factory overhead controllable variance, 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.

# Direct Materials, Direct Labor

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

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 4,400 units of product were as follows:

 Standard Costs Actual Costs Direct materials 5,700 lb. at \$5.20 5,600 lb. at \$5.10 Direct labor 1,100 hrs. at \$16.60 1,130 hrs. at \$16.90 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,150 direct labor hrs.: Variable cost, \$4.10 \$4,460 variable cost Fixed cost, \$6.50 \$7,475 fixed cost

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.

 Variable factory overhead controllable variance Favorable Fixed factory overhead volume variance Unfavorable Total factory overhead cost variance Unfavorable

# Direct Materials, Direct Labor

The doormat division of Clean Sweep Company produces all-vinyl mats.

Each doormat calls for .4 meter of vinyl material: the material should cost \$3.20 per meter. Standard direct labor hours and labor cost per format are .2 hour and \$1.84 (.2×9.20 per hour), respectively.

Currently the division’s standard variable overhead rate is \$1.50 per direct labor hour, and its standard fixed overhead rate is \$.80 per direct labor hour.

In August, the division manufactured and sold 60,000 doormats. During the month, it used 25,200 meters of vinyl material; the total cost of the materials was \$73,080. The total actual overhead costs for August were \$28,200 of which \$18,200 was variable.

The total # of direct labor hours worked was 10,800 and the factory payroll for direct labor for the month was \$95,040. Budgeted fixed overhead for August was \$9,280. Normal monthly capacity for the year was set at 58,000 documents.

REQUIRED:

1. Compute for August the (a) direct materials price variance, (b) direct materials quantity variance, (c) direct labor rate variance, (d) direct labor efficiency variance, (e) variable overhead spending variance, (f) variable overhead efficiency variance (g) fixed overhead budget variance, and (h) fixed overhead volume variance.

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