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 50 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$15
Standard labor time per unit	20 min.
Standard number of lbs. of brass	1.2 lbs.
Standard price per lb. of brass	$10.75
Actual price per lb. of brass	$11
Actual lbs. of brass used during the week	7,416 lbs.
Number of units produced during the week	6,000
Actual wage per hour	$15.45
Actual hours for the week (50 employees × 32 hours)	1,600 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	$
Direct Materials Quantity Variance	$
Total Direct Materials Cost Variance	$

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	$
Direct Labor Time Variance	$
Total Direct Labor Cost Variance	$

Answer 1

• All working forms part of the answer
• PLEASE NOTE:

--Favourable & Unfavourable Variances are computed below and mentioned as Favourable and Unfavourable (as the case may be).

--PLEASE, as per instruction, enter Favourable Variance as NEGATIVE and Unfavourable variance as POSITIVE number.

• Working

Actual DATA for		6000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	7416	$            11.000	$           81,576.00
Direct labor	1600	$              15.45	$           24,720.00

Standard DATA for		6000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.2 lbs x 6000 units)=7200 lbs	$                10.75	$       77,400.00
Direct labor (20 minutes = 0.3333 hours)	( 0.333333333333333 hours x 6000 units)=2000 hours	$                15.00	$       30,000.00

• Requirement ‘a’

Direct materials standard cost per unit [$77,400 / 6000 units]	$ 12.90
Direct labor standard cost per unit [$30,000 / 6000 units]	$ 5.00
Total standard cost per unit	$ 17.90

• Requirement ‘b’

Direct Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     10.75	-	$                    11.00	)	x	7416
	-1854
	Variance		$              1,854.00			Unfavourable-U
Direct Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	7200	-	7416	)	x	$                        10.75
	-2322
	Variance		$              2,322.00			Unfavourable-U
Total Material Cost Variance
(	Standard Cost	-	Actual Cost	)
(	$             77,400.00	-	$            81,576.00	)
	-4176
	Variance		$              4,176.00			Unfavourable-U

• Requirement ‘c’

Direct Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     15.00	-	$                    15.45	)	x	1600
	-720
	Variance		$                  720.00			Unfavourable-U
Direct Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2000	-	1600	)	x	$                        15.00
	6000
	Variance		$              6,000.00			Favourable-F
Total Direct Labor Cost Variance
(	Standard Cost	-	Actual Cost	)
(	$             30,000.00	-	$            24,720.00	)
	5280
	Variance		$              5,280.00			Favourable-F