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 70,000 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	196,000 lbs. at $5.30		194,000 lbs. at $5.20
Direct labor	17,500 hrs. at $18.30		17,900 hrs. at $18.60
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 18,260 direct
	labor hrs.:
		Variable cost, $3.80	$65,840 variable cost
		Fixed cost, $6.00	$109,560 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.

Direct Material Price Variance	$fill in the blank 1	FavorableUnfavorableFavorable
Direct Materials Quantity Variance	$fill in the blank 3	FavorableUnfavorableFavorable
Total Direct Materials Cost Variance	$fill in the blank 5	FavorableUnfavorableFavorable

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	FavorableUnfavorableUnfavorable
Direct Labor Time Variance	$fill in the blank 9	FavorableUnfavorableUnfavorable
Total Direct Labor Cost Variance	$fill in the blank 11	FavorableUnfavorableUnfavorable

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.

Variable factory overhead controllable variance	$fill in the blank 13	FavorableUnfavorableFavorable
Fixed factory overhead volume variance	$fill in the blank 15	FavorableUnfavorableUnfavorable
Total factory overhead cost variance	$fill in the blank 17	FavorableUnfavorableUnfavorable

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