Question

Direct Materials and Direct Labor Variance Analysis

Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows:

Standard wage per hr.	$12.00
Standard labor time per unit	12 min.
Standard number of yds. of fabric per unit	5.0 yds.
Standard price per yd. of fabric	$5.00
Actual price per yd. of fabric	$5.10
Actual yds. of fabric used during the week	26,200 yds.
Number of units produced during the week	5,220
Actual wage per hr.	$11.80
Actual hrs. for the week	1,000 hrs.

Required:

a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.

Direct materials standard cost per unit	$
Direct labor standard cost per unit	$
Total standard cost per unit	$

b. Determine the price variance, 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.

Price variance	$
Quantity variance	$
Total direct materials cost variance	$

c. Determine the rate variance, 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.

Rate variance	$
Time variance	$
Total direct labor cost variance	$

Answer 1

• All working forms part of the answer
• Workings

Actual DATA for		5220	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	26200	$              5.100	$        133,620.00
Direct labor	1000	$              11.80	$           11,800.00

• Requirement ‘a’

Working

Standard DATA for		5220	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 5 yards x 5220 units)=26100 yards	$                   5.00	$     130,500.00
Direct labor	( 0.2 hours x 5220 units)=1044 hours	$                12.00	$       12,528.00
Variable Overhead	( 0.5 hours x 5220 units)=2610 hours	$                   4.40	$       11,484.00

Direct material standard cost per unit = $ 130500/5220 units = $ 25 per unit
Direct Labor standard cost per unit = $ 12528 / 5220 = $ 2.40 per unit

Total Standard cost per unit = 25 + 2.4 = $ 27.40 per unit

• Requirement ‘b’

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        5.00	-	$                       5.10	)	x	26200
	-2620
	Variance		$              2,620.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	26100	-	26200	)	x	$                           5.00
	-500
	Variance		$                  500.00			Unfavourable-U
Direct Material Cost Variance
(	Standard Cost	-	Actual Cost	)
(	$           130,500.00	-	$          133,620.00	)
	-3120
	Variance		$              3,120.00			Unfavourable-U

• Requirement ‘c’

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     12.00	-	$                    11.80	)	x	1000
	200
	Variance		$                  200.00			Favourable-F
Labour Time Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1044	-	1000	)	x	$                        12.00
	528
	Variance		$                  528.00			Favourable-F
Direct Labor Cost Variance
(	Standard Cost	-	Actual Cost	)
(	$             12,528.00	-	$            11,800.00	)
	728
	Variance		$                  728.00			Favourable-F