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 40 employees. Each employee presently provides 35 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$11.4
Standard labor time per unit	20 min.
Standard number of lbs. of brass	1.8 lbs.
Standard price per lb. of brass	$12.5
Actual price per lb. of brass	$12.75
Actual lbs. of brass used during the week	11,680 lbs.
Number of units produced during the week	6,300
Actual wage per hour	$11.74
Actual hours for the week (40 employees × 35 hours)	1,400 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

Part A

Direct materials standard cost per unit = 1.8*12.50 = $22.50 per unit

Direct labor standard cost per unit = 20/60*11.40 = $3.80 per unit

Total standard cost per unit= 22.50 + 3.80 = $26.30 per unit

Part B

Materials price variance = (Standard price - actual price) x Material purchased
= {$12.50 - $12.75} x 11680= $2920 Unfavorable

Materials quantity variance = (Standard quantity - actual quantity used) x standard price
= {(6300*1.8) - 11680} x $12.50 = $4250 Unfavorable

Total Direct Materials Cost Variance = $2920 unfavorable + $4250 unfavorable = $7170 Unfavorable

Part C

Labor rate variance = (Standard rate - actual rate) x Actual hours used
= {$11.40 - $11.74} x 1400 = $476 Unfavorable

Labor efficiency variance = (Standard hours - actual hours) x Standard rate
= {(6300*20/60) - 1400} x $11.40 = $7980 Favorable

Total Direct Labor Cost Variance =$476 unfavorable + $7980 Favorable = $7504