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 50 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	15 min.
Standard number of lbs. of brass	1.5 lbs.
Standard price per lb. of brass	$10
Actual price per lb. of brass	$10.25
Actual lbs. of brass used during the week	12,051 lbs.
Number of units produced during the week	7,800
Actual wage per hour	$11.74
Actual hours for the week (50 employees × 35 hours)	1,750 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	$	Unfavorable
Direct Materials Quantity Variance	$	Unfavorable
Total Direct Materials Cost Variance	$	Unfavorable

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	$	Unfavorable
Direct Labor Time Variance	$	Favorable
Total Direct Labor Cost Variance	$	Favorable

Answer 1

Solution a:

Direct materials standard cost per unit = Standard quantity per unit * Standard rate = 1.5*$10 = $15 per unit

Direct labor standard cost per unit = Standard hour per unit * Standard rate = 0.25 * $11.4 =$2.85 per unit

Total standard cost per unit = $15 + $2.85 = $17.85 per unit

Solution b:

Standard quantity of material = 7800*1.50 = 11700 lbs

Actual quantity of material = 12051 lbs

Standard price of material = $10

actual price of material = $10.25

Direct material price variance = (SP - AP) * AQ = ($10 - $10.25) * 12051 = $3,012.75 U

Direct material quantity variance = (SQ - AQ) * SP = (11700 - 12051) * $10 = $3,510 U

Total direct material cost variance = Direct material price variance + Direct material quantity variance

= $3,012.75 + $3,510 = $6,522.75 U

Solution c:

Standard labor hours = 7800*0.25 = 1950 hours

Actual labor hours = 1750 hours

Standard rate of labor = $11.40 per hour

Actual rate of labor = $11.74 per hour

Direct labor rate variance = (SR - AR) * AH = ($11.40 - $11.74) * 1750 = $595 U

Direct labor time variance = (SH - AH) * SR = (1950 - 1750) *$11.40 = $2,280 F

Total direct labor cost variance = $595 U + $2,280 F = $1,685 F