10. Determine and interpret the direct materials price and quantity variances for the three materials. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Direct Materials Price Variance

Cream Base

Natural Oils

Bottles

Actual price

Standard price

Difference

X Actual quantity

oz.

oz.

btls.

Direct materials price variance

F

U

F

Direct Materials Quantity Variance

Cream Base

Natural Oils

Bottles

Actual quantity

oz.

oz.

btls.

Standard quantity

Difference

oz.

oz.

btls.

X Standard price

Direct materials quantity variance

U

U

U

The fluctuation in market prices caused the direct material price variances. All the quantity variances were unfavorable indicating some material losses and rejections .

11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest tenth of an hour. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Direct Labor Rate Variance

Mixing Department

Filling Department

Actual rate

Standard rate

Difference

X Actual time

Direct labor rate variance

U

F

Direct Labor Time Variance

Mixing Department

Filling Department

Actual time

Standard time

Difference

X Standard rate

Direct labor time variance

F

U

The change in the labor classification caused the labor rate variances. This change could also have been responsible for the direct labor time variance.

12. Determine and interpret the factory overhead controllable variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Factory Overhead Controllable Variance

Actual variable overhead

Variable overhead at standard cost

Factory overhead controllable variance

U

The factory overhead controllable variance was caused by the variance in utilities .

13. Determine and interpret the factory overhead volume variance. Round rate to four decimal places. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Factory Overhead Volume Variance
Normal volume (cases)
Actual volume (cases)
Difference
X Fixed factory overhead rate
Factory overhead volume variance		U The volume variance indicates the cost of underused capacity . 14. Why are the standard direct labor and direct materials costs in the calculations for parts (10) and (11) based on the actual 1,500-case production volume rather than the planned 1,375 cases of production used in the budgets for parts (6) and (7)? Variable costs of the budget must flex to the standard production volume so that variances are compared across the same production volume.