Question

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	$

Answer 1

A)	Standard cost for direct material per unit = 5*5 =25 per unit
	Standard cost for direct labour per unit = 12*12/60=$2.4 per unit
	Total Standard cost per unit = total labour standard cost+ total material standard cost
	Total Standard cost per unit = 25+2.40 = 27.40
B)	Direct material price variance =	(standard price-actual price )*actual qty
		(5-5.10)*26200
		(2620) unfavourable
	Direct material qty variance =	(standard qty for actual output-actual qty)*std rate
		[(5220*5)-26200)]*5
		(500) unfavourable
	Direct Material cost variance=	( standard cost - actual cost)
		(26100*5)-(26200*5.10)
		(3120) unfavourable
	Direct Labour rate variance=	( std rate- actual rate)*actual hours
		(12-11.80)*1000
		200 favourable
	Direct labour time variance=	(std hours for actual output-actual hours)*std rate
		(1044-1000)*12
		528 favourable
	Direct labour cost Variance =	( std cost - actual cost)
		(1044*12)-(1000*11.80)
		12528-11800
		728 favourable