Question

Direct Materials and Direct Labor Variance Analysis

Shasta Fixture Company manufactures faucets in a small manufacturing facility. The faucets 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	$15.00
Standard labor time per unit	20 min.
Standard number of lbs. of brass	2.1 lbs.
Standard price per lb. of brass	$12.00
Actual price per lb. of brass	$12.25
Actual lbs. of brass used during the week	16,871 lbs.
Number of units produced during the week	7,800
Actual wage per hour	$15.45
Actual hours for the week (50 employees × 32 hours)	1,600

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

Answer :

(a)

Direct material standard cost per unit ( 2.1 lbs * $ 12 )	$ 25.20
Direct Labor standard cost per unit ( 20 min* $ 15/60)	$ 5
Total standard cost per unit	$ 30.20

(b)

Direct Materials Price Variance	$ 4218	Unfavorable
Direct Materials Quantity Variance	$ 5892	Unfavorable
Total Direct Materials Cost Variance	$ 10110	Unfavorable

Direct material price variance = ( SP - AP ) * AQ

= ( $ 12 - $ 12.25 ) * 16871 lbs

= $ 4218 Unfavorable

Direct Material Quantity variance = (SQ - AQ )*SP

= (7800 unit * 2.1 lbs - 16871 lbs ) * $ 12

= $ 5892 Unfavorable

Total Direct material cost variance = Direct material price variance + Direct material Quantity variance

= $ 4218 Unfavorable + $ 5892 Unfavorable

= $ 10110 Unfavorable

(c)

Direct Labor Rate Variance	$ 720	Unfavorable
Direct Labor Time Variance	- $ 15000	Favorable
Total Direct Labor Cost Variance	- $ 14280	Favorable

Direct Labor rate variance = (SR - AR )* AH

= ($ 15 - $ 15.45 ) * 1600 hour

= $ 720 Unfavorable  

Direct Labor Time variance = (SH - AH )*SR

=( 7800 unit * 20 / 60 - 1600 hour )* $ 15

= $ 15000 Favorable

Total Direct Labor cost variance = Direct Labor rate variance + Direct Labor Time variance

= $ 720 Unfavorable + $ 15000 Favorable

= $ 14280 Favorable