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 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hour $14.4
Standard labor time per unit 20 min.
Standard number of lbs. of brass 1.3 lbs.
Standard price per lb. of brass $10.75
Actual price per lb. of brass $11
Actual lbs. of brass used during the week 12,051 lbs.
Number of units produced during the week 9,000
Actual wage per hour $14.83
Actual hours for the week (40 employees × 36 hours) 1,440 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

Req1:
Std cost per unit:
Direct Material cost per unit (1.3 lbs @ 10.75)					13.975
Direct Labour cost per unit (20 mins @14.40 per hour)					4.8
Total Std cost per unit					18.775
Req 2:
Actual output: 9000 units
Std qty allowed (9000*1.3): 11700
St price per lbs: $ 10.75
Actual Qty consumed: 12051 lbs
Actual price: 11.00
Material price variance: Actual Qty used (Std price-Actual price)
		12051 (10.75- 11.00) = 3012.75 Unfav
Material Qty variance: Std price(Std qty-Actual Qty)
		10.75 (11700-12051) = 3773.25 Unfav
Material Cost variance:; Std qty*Std price - Actual Qty *Actual price
		11700 *10.75 - 12051*11 = 6786 Unfav
Req 3:
Std labour hours allowed (9000*20/60): 3000 hours
Std rate per hour: 14.40
Actual hours worked: 1440 hours
Actual rate per hour: 14.83
Labour rate variance: Actual Hours (Std rate-Actual rate)
		1440 (14.40 - 14.83 ) = $ 619.20 Unfav
Labour Efficiency Variance: Std rate (Std hours-Actual hours)
		14.40 (3000-1440) = 22464 Fav
Labour cost variance: Std hours*Std rate -Actual hours*Actual rate
		3000*14.40 - 1440*14.83 = 21844.80 Fav