Chapter 23, Problem 23.3BPR

### Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Chapter
Section

### Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

# Direct materials, direct labor, and factory overhead cost variance analysis Road Gripper Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,160 tires were as follows:   Standard Costs Actual Costs Direct materials 100,000 lb. at $6.40 101,000 lb. at$6.50 Direct labor 2,080 hrs. at $15.75 2,000 hrs. at$15.40 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 2,000 direct labor hrs.:     Variable cost, $4.00$8,200 variable cost   Fixed cost, $6.00$12,000 fixed cost  Each tire requires 0.5 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.

(a)

To determine

Direct material variances:

The difference between the actual material cost per unit and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

• Direct materials price variance.
• Direct materials quantity variance.

Direct labor variances:

The difference between the actual labor cost in the production and the standard labor cost for actual production is known as direct labor cost variance. The direct labor variance can be classified as follows:

• Labor rate variance.
• Labor time variance.

The difference between the actual variable overhead costs and the standard overhead for actual production is known as the variable factory overhead controllable variances. The variable factory overhead controllable variance is computed as follows:

Factory overhead volume variances refers to the difference between the budgeted fixed overheads at 100% of normal capacity, and the standard fixed overheads for the actual units produced. The factory overhead volume variances can be calculated as follows:

Fixed factory overheadvolume variance}(Standard hours for 100% ofnormal capacityStandardhours for actual units produced)×(Fixed factory overhead rate)

To determine: The direct materials price variance.

Explanation

Determine the direct materials price variance.

Direct materials price variance = [(Actual priceStandard price)× Actual quantity]=[(\$6

(b)

To determine
The direct labor rate variance, direct labor time variance, and total direct labor cost variance.

(c)

To determine
The variable factory overhead controllable variance.

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