Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 30 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hour $12.00
Standard labor time per faucet 20 min.
Standard number of lbs. of brass 1.8 lbs.
Standard price per lb. of brass $12.75
Actual price per lb. of brass $13.00
Actual lbs. of brass used during the week 16,130 lbs.
Number of faucets produced during the week 8,700
Actual wage per hour $12.36
Actual hours for the week (30 employees × 36 hours) 1,080 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 $
Direct Labor Time Variance $
Total Direct Labor Cost Variance $

Answer 1

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

Standard DATA for		1	units
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	1.8	$              12.75	$                   22.95
Direct labor	0.333333	$              12.00	$                     4.00

Direct Material standard cost per unit = $ 22.95

Direct Labor Standard cost per unit = $ 4.00

Total Standard cost per unit = 22.95 + 4 = $ 26.95

• Working for Requirement ‘b’ and ‘c’

Actual DATA for		8700	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	16130	$            13.000	$        209,690.00
Direct labor	1080	$              12.36	$           13,348.80

Standard DATA for		8700	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.8 lbs x 8700 units)=15660 lbs	$                12.75	$     199,665.00
Direct labor	( 20/60) hrs x 8700 units)=2900 hrs	$                12.00	$       34,800.00

• Requirement ‘b’

--Direct Material Price Variance

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     12.75	-	$                    13.00	)	x	16130
	-4032.5
	Variance		$              4,033			Unfavourable-U

--Direct material Quantity variance

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	15660	-	16130	)	x	$                        12.75
	-5992.5
	Variance		$              5,993			Unfavourable-U

--Total Direct material cost variance

Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$           199,665.00	-	$          209,690.00	)
	-10025
	Variance		$            10,025.00			Unfavourable-U

• Requirement ‘c’

--Direct Labor rate Variance

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     12.00	-	$                    12.36	)	x	1080
	-388.8
	Variance		$                  389			Unfavourable-U

--Direct labor time variance

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2900	-	1080	)	x	$                        12.00
	21840
	Variance		$            21,840.00			Favourable-F

--Total Direct Labor cost variance

Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$             34,800.00	-	$            13,348.80	)
	21451.2
	Variance		$            21,451			Favourable-F