22l Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

ID: 2493557 • Letter: 2

Question

22l Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Eastern Polymers, 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 4,400 units of product were as follows: Standard Costs Actual Costs Direct materials Direct labor Factory overhead 5,700 lbs. at $5.30 1,100 hrs. at $17.80 Rates per direct labor hr., based on 100% of normal capacity of 1,150 direct labor hrs. 5,600 lbs. at $5.20 1,130 hrs. at $18.30 variable cost, $4.90 $5,340 variable cost Fixed cost, $7.70 $8,855 fixed cost Each unit requires 0.25 hour of direct labor. Required: a. Determine the direct materials price variance, direct materials guantity 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. Price variance Quantity variance Total direct materials cost variance Favorable Favorable Favorable

Explanation / Answer

=(5.20 – 5.30)5600

= 560(U)

=(AQ – SQ) SP

= (5600 -5,700)5.30

= 530(F)

Vairable factory overhead controllable variance

= 5340 –(4400*.25 *4.90)

= 50(F)

Fixed factory overhead volume variance

= 8,855 – (4400*.25*7.70)

= 385(U)

Total factory overhead variance = 335(U)

Material price variance = (AP- SP) AQ