Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 70 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:

Standard wage per hr.	$13.80
Standard labor time per faucet	10 min.
Standard number of lb. of brass	1.90 lb.
Standard price per lb. of brass	$12.50
Actual price per lb. of brass	$12.75
Actual lb. of brass used during the week	15,300 lb.
Number of faucets produced during the week	7,800
Actual wage per hr.	$14.20
Actual hrs. per week	2,240 hrs.

Required:

a. Determine the standard cost per faucet for direct materials and direct labor. Round the cost per unit to two decimal places.

Direct materials standard cost per faucet	$
Direct labor standard cost per faucet	$
Total standard cost per faucet	$

b. Determine the direct materials price variance, direct materials 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 direct labor rate variance, direct labor 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	$

Answer 1

a.
Direct materials standard cost per faucet	=	$    23.75
Direct labour standard cost per faucet	=	$      2.30
Total standard cost per faucet	=	$    26.05
Direct materials standard cost per faucet	=	Standard price X Standard quantity
	=	$12.50 X 1.90 lb
	=	$    23.75
Direct labour standard cost per faucet	=	Standard wage rate X Standard labor time
	=	($13.80 / 60 min) X 10 min
	=	$      2.30
b.
Price variance	=	3,825
Quantity variance	=	6,000
Total direct materials cost variance	=	9,825
Price variance	=	(Actual price - Standard price) X Actual quantity
	=	($12.75 - $12.50) X 15,300
	=	3,825	Unfavourable
Quantity variance	=	(Actual quantity - Standard quantity*) X Standard price
	=	(15,300 - 14,820) X $12.50
	=	6,000	Unfavourable
*Standard quantity	=	7,800 X 1.90 lb
	=	14,820
c.
Rate variance	=	896
Time variance	=	12,972
Total direct labour cost variance	=	13,868
Rate variance	=	(Actual rate per hr - Standard rate per hr) X Actual hrs
	=	($14.20 - $13.80) X 2,240 hrs
	=	896	Unfavourable
Time variance	=	(Actual direct labour hrs - Standard direct labour hrs*) X Standard rate per hr
	=	(2,240 - 1,300) X $13.80
	=	12,972	Unfavourable
* Standard direct labour hrs	=	(7,800 / 60 min) X 10 min
	=	1,300