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

Santiago 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

Direct

materials

Direct labor $18,500hrs.$ at $$16\mathrm{.}40$ per hr$.$

Factory Rates per direct labor hr$.,$ based on $100\%$ of normal capacity of $19,310$

overhead direct labor hrs$.$:

Variable cost, $$4\mathrm{.}00$

Fixed cost, $$6\mathrm{.}30$

Actual Costs

$227,100$ lbs$.$ at $$5\mathrm{.}10$

per lb$.$

$18,930$ hrs$.$ at $$16\mathrm{.}70$

per hr$.$

$$73,260$ variable cost

$$121,653$ fixed cost

Each unit requires $0\mathrm{.}25$ 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 Materials Price Variance

Direct Materials Quantity Variance $

Total Direct Materials Cost Variance $

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 $

Direct Labor Time Variance $$.$

Total Direct Labor Cost Variance $

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 $

Fixed factory overhead volume variance