Plastik World Company processes a base chemical into plastic.Standard Costs and
ID: 2433901 • Letter: P
Question
Plastik World Company processes a base chemical into plastic.Standard Costs and Actual Costs for DM, DL, and Factory O/Hincurred for the manufacture of 2,600 units of product were asfollows:Standard Costs Actual Costs
DM 6,850 pounds at$6.40 7,000pounds at $6.35
DL 2,050 hours at$19.80 2,100hours at $20.20
FactoryO/H Rates per DL hour,
based on 100% of normal
capacity of 1,950 DL hours:
Variable Cost, $2.50 $4,970 Variable Cost
Fixed Cost,$4.50 $8,775 Fixed Cost
Each unit requires 0.6 hour of DL.
Instructions
Determine (a) the Price Variance, Quantity Variance, and Total DMCost Variance; (b) the Rate Variance, Time Variance, and Total DLCost Variance; and (c) Variable Factory O/H Controllable Variance,the Fixed Factory O/H Volume Variance, and Total Factory O/H CostVariance. ?
*The txtbook have stated a partial answer...
(c) Controllable Variance, $155 F
Explanation / Answer
Determine (a) the Price Variance, Quantity Variance, and TotalDM Cost Variance ======================================================== Direct materials pricevariance = (SP - AP)x AQ = ($6.40 - $6.35) x 7,000pounds = $350Favorable DM QuantityVariance = (AQx SP) - (SQ x SP) = (7,000 x $6.40) - (6,850x $6.40) = $960 Unfavorable DM Total CostVariance = Standardmaterials cost - Actual materials cost = (6,850x $6.40) - (7,000 x $6.35) = $43,840 - $44,450 = $610 Unfavorable ____________________________________________________________________________________________(b) the Rate Variance, Time Variance, and Total DL CostVariance DL Ratevariance = (SR - AR) x Actualhours worked = ($19.80 - $20.20) x 2,100hours = $840Unfavorable DL Timevariance = (AH - SH) x SR = (2,100 - 2,050) x$19.80 = $990Unfavorable Total DL CostVariance = Actual laborCost - Standard labor cost = (2,100 x $20.20) - (2,050 x $19.80) = $1,830Unfavorable ____________________________________________________________________________________________ (c) Variable Factory O/H Controllable Variance Actaulvariable Overhead - Standard variableoverhead = $4,970 - (2,050 x $2.50) = $4,970 - $5,125 = $155Favorable ____________________________________________________________________________________________ Fixed Factory O/H Volume Variance ========================= Actual Fixed Overhead - Fixed overheadapplied = $8,775 - (2,050 x $4.50per DLH) = $8,775 - $9,225 = $450Favorable