Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 60 employees. Each employee presently provides 35 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$14.4
Standard labor time per unit	15 min.
Standard number of lbs. of brass	1.2 lbs.
Standard price per lb. of brass	$11.5
Actual price per lb. of brass	$11.75
Actual lbs. of brass used during the week	11,124 lbs.
Number of units produced during the week	9,000
Actual wage per hour	$14.83
Actual hours for the week (60 employees × 35 hours)	2,100 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 direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials Price Variance	$	Unfavorable
Direct Materials Quantity Variance	$	Unfavorable
Total Direct Materials Cost Variance	$	Unfavorable

c. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Labor Rate Variance	$	Unfavorable
Direct Labor Time Variance	$	Favorable
Total Direct Labor Cost Variance	$	Favorable

Answer 1

• All working forms part of the answer
• Requirement ‘a’

Working

Standard DATA for		9000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.2 yards x 9000 units)=10800 yards	$                11.50	$     124,200.00
Direct labor	( 0.25 hours x 9000 units)=2250 hours	$                14.40	$       32,400.00

Direct materials standard cost per unit	$ 13.80 [$ 124,200 / 9000 units]
Direct labor standard cost per unit	$ 3.60 [$ 32,400 / 9000 units]
Total standard cost per unit	$ 17.40

• Requirement ‘b’

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     11.50	-	$                    11.75	)	x	11124
	-2781
	Variance		$              2,781.00			Unfavourable-U

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	10800	-	11124	)	x	$                        11.50
	-3726
	Variance		$              3,726.00			Unfavourable-U

Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$           124,200.00	-	$          130,707.00	)
	-6507
	Variance		$              6,507.00			Unfavourable-U

Answers

Direct Materials Price Variance	$ 2,781	Unfavorable
Direct Materials Quantity Variance	$ 3,726	Unfavorable
Total Direct Materials Cost Variance	$ 6,507	Unfavorable

• Requirement ‘c’

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     14.40	-	$                    14.83	)	x	2100
	-903
	Variance		$                  903.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2250	-	2100	)	x	$                        14.40
	2160
	Variance		$              2,160.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$             32,400.00	-	$            31,143.00	)
	1257
	Variance		$              1,257.00			Favourable-F

Answers

Direct Labor Rate Variance	$ 903	Unfavorable
Direct Labor Time Variance	$ 2,106 [Enter with minus sign]	Favorable
Total Direct Labor Cost Variance	$ 1,257 [Enter with minus sign]	Favorable