00 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
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Direct Materials, Direct Labor, and
Mackinaw Inc. processes a base chemical into plastic.
| 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.
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.
| Direct materials price variance | $fill in the blank 1 | |
| Direct materials quantity variance | fill in the blank 3 | |
| Total direct materials cost variance | $fill in the blank 5 |
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.
| Direct labor rate variance | $fill in the blank 7 | |
| Direct labor time variance | fill in the blank 9 | |
| Total direct labor cost variance | $fill in the blank 11 |
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.
| Variable factory overhead controllable variance | $fill in the blank 13 | |
| Fixed factory overhead volume variance | fill in the blank 15 | |
| Total factory overhead cost variance | $fill in the blank 17 |
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