Hawley Inc. manufactures woven baskets for national distribution. The standard costs for the manufacture of Folk Art style baskets were as follows:

Question

	Standard Costs	Actual Costs
Direct materials	1,500 lbs. at $35	1,600 lbs. at $32
Direct labor	4,800 hrs. at $11	4,500 hrs. at $11.80
Factory overhead	Rates per labor hour, based on 100% of normal capacity of 5,500 labor hrs.:
	Variable cost, $2.40	$12,300 variable cost
	Fixed cost, $3.50	$19,250 fixed cost

instructions

1. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance for the Folk Art style baskets.

2. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance for the Folk Art style baskets.

3. Determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance for the Folk Art style baskets.

Accepted Answer

1.

Direct materials Cost variance

price variance:
Direct Materials Price Variance = (Actual Price – Standard Price) × Actual Quantity
Direct Materials Price Variance = ($32 per lb. – $35 per lb.) × 1,600 lbs.
Direct Materials Price Variance = –$4,800 Favorable Variance
Quantity variance:
Direct Materials Quantity Variance = (Actual Quantity – Standard Quantity) × Standard Price
Direct Materials Quantity Variance = (1,600 lbs. – 1,500 lbs.) × $35 per lb.
Direct Materials Quantity Variance = $3,500 Unfavorable Variance
Total direct materials cost variance:
Direct Materials Cost Variance = Direct Materials Quantity Variance + Direct Materials Price Variance
Direct Materials Cost Variance = $3,500 + ($4,800)
Direct Materials Cost Variance = –$1,300 Favorable Variance

2.

Direct labor Cost variance

Rate variance:
Direct Labor Rate Variance = (Actual Rate per Hour – Standard Rate per Hour) × Actual Hours
Direct Labor Rate Variance = ($11.80 – $11.00) × 4,500 hrs.
Direct Labor Rate Variance = $3,600 Unfavorable Variance
Time variance:
Direct Labor Time Variance = (Actual Direct Labor Hours – Standard Direct Labor Hours) × Standard Rate per Hour
Direct Labor Time Variance = (4,500 hrs. – 4,800 hrs.) × $11.00 per hour
Direct Labor Time Variance = –$3,300 Favorable Variance
Total direct labor cost variance:
Direct Labor Cost Variance = Direct Labor Time Variance + Direct Labor Rate Variance
Direct Labor Cost Variance = ($3,300) + $3,600
Direct Labor Cost Variance = $300 Unfavorable Variance

3.

Factory overhead Cost variance

variable factory overhead controllable variance:
Variable Factory Overhead Controllable Variance = Actual Variable Factory Overhead – Budgeted Variable Factory Overhead
Variable Factory Overhead Controllable Variance = $12,300 – $11,520*
Variable Factory Overhead Controllable Variance = $780 Unfavorable Variance
*4,800 hrs. × $2.40 per hour
fixed factory overhead volume variance:
Fixed Factory Overhead Volume Variance = (Standard Hours for 100% of Normal Capacity – Standard Hours for Actual Units Produced) × Fixed Factory Overhead Rate
Fixed Factory Overhead Volume Variance = (5,500 hrs. – 4,800 hrs.) × $3.50 per hr.
Fixed Factory Overhead Volume Variance = $2,450 Unfavorable Variance
Total factory overhead cost variance:
Factory Overhead Cost Variance = Variable Factory Overhead Controllable Variance + Fixed Factory Overhead Volume Variance
Factory Overhead Cost Variance = $780 + $2,450
Factory Overhead Cost Variance = $3,230 Unfavorable Variance

Question 22.IP.1: Hawley Inc. manufactures woven baskets for national distribu...

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