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 30 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$15.6
Standard labor time per unit	20 min.
Standard number of lbs. of brass	2 lbs.
Standard price per lb. of brass	$10
Actual price per lb. of brass	$10.25
Actual lbs. of brass used during the week	13,596 lbs.
Number of units produced during the week	6,600
Actual wage per hour	$16.07
Actual hours for the week (30 employees × 36 hours)	1,080 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

a.	Standard labor time per unit in hours = 20 / 60 = 1/3 hours
	Direct materials standard cost per unit ( Standard number of lbs. of brass * Standard price per lb. of brass = 2 * 10 )	20.00
	Direct labor standard cost per unit ( Standard labor time per unit in hours * Standard wage per hour = 1/3 * 15.6 )	5.20
	Total standard cost per unit	25.20

b.	Direct materials price variance = ( Actual price - Standard price ) * Actual quantity = ( 10.25 - 10 ) * 13596 =	3399	Unfavorable
	Standard quantity of direct materials for actual production = Number of units produced during the week * Standard number of lbs. of brass = 6600 * 2 =	13200
	Direct materials quantity variance = ( Actual quantity - Standard quantity ) * Standard price = ( 13596 - 13200 ) * 10 =	3960	Unfavorable
	Total direct materials cost variance = ( Actual quantity * Actual price ) - ( Standard quantity * Standard price ) = ( 13596 * 10.25 ) - ( 13200 * 10 ) =	7359	Unfavorable

c.	Direct labor rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 16.07 - 15.6 ) * 1080 =	508	Unfavorable
	Standard hours for actual production = Number of units produced during the week * Standard labor hours per unit = 6600 * 1/3 =	2200
	Direct labor time variance = ( Actual hours - Standard hours ) * Standard rate = ( 1080 - 2200 ) * 15.6 =	-17472	Favorable
	Total direct labor cost variance = ( Actual hours * Actual rate ) - ( Standard hours * Standard rate ) = ( 1080 * 16.07 ) - ( 2200 * 15.6 ) =	-16964	Favorable