In: Accounting
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 | $ |
a.
Standard quantity/hours per unit | Standard price/rate per quantity/hour | = | Standard cost per unit | |||||
Direct material |
5 | Yards | $5 | Per yard | = | $25 | Per unit | |
Direct labor | 12 | Minutes | $12 | Per hour | = | 2.4 ($12/60*12) | Per unit | |
Total cost | = | $27.4 | Per unit |
b.
Price variance = (Standard price - Actual price) * Actual quantity
Price variance = ($5 - $5.10) * 26,200 = $2,620 Unfavorable
Quantity variance = (Standard quantity - Actual quantity) * Standard price
Quantity variance =[(5,220*5) - 26,200]* $5
Quantity variance =(26,100 - 26,200) * $5 = $500 Unfavorable
Total direct material cost variance = $2,620U+ $500 U = $3,120 Unfavorable
c.
Rate variance = (Standard rate - Actual rate) * Actual hours
Rate variance = ($12 - $11.80) * 1,000 = $200 Favorable
Time variance = (Standard hours - Actual hours) * Standard rate
Time variance =[5,220*12/60) - 1,000] * $12
Time variance =(1,044 - 1,000) * $12 = $528 Favorable
Total direct labor cost variance = $200 F + $528F = $728 Favorable