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	$12
Standard labor time per unit	20 min.
Standard number of lbs. of brass	1.8 lbs.
Standard price per lb. of brass	$12.25
Actual price per lb. of brass	$12.5
Actual lbs. of brass used during the week	12,793 lbs.
Number of units produced during the week	6,900
Actual wage per hour	$12.36
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	$____________	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

Part (a)

Direct Materials Standard Cost Per Unit (Standard Quantity of Brass*Standard Price of Brass) = 1.8 lbs.* $12.25

= $22.05

Direct Labour Standard Cost Per Unit (Standard Labour Time Per Unit*Standard Wage Per Hour) = 20 Min.*$12

= $240

Total Standard Cost Per Unit = $22.05+$240

= $262.05

Part (b) & (c)

Actual Production = 6,900 units

Standard

Actuals

	Quantity	Rate	Total		Quantity	Rate	Total
Material	1.8lbs.*6900units = 12,420lbs.	$12.25 per lb.	$152,145	Material	12,793 lbs.	$12.5 per lb.	$159,912.50
Labour	20 Min.*6900 units/60 = 2,300 Hours	$ 12 Per Hour	$27,600	Labour	1440 Hours	$12.36 Per Hour	$17,798.40
Total			$179,745	Total			$177,710.90

Direct Materials Price Variance = (Standard Price-Actual Price)Actual Quantity

= ($12.25-$12.5)12,793 lbs.

= $3,198.25 (Unfavorable)

Direct Materials Quantity Variance = (Standard Quantity-Actual Quantity)Standard Price

= (12,420 lbs.- 12,793 lbs.)$12.25

= $4,569.25 (Unfavorable)

Total Direct Materials Cost Variance = Direct Materials Price Variance + Direct Materials Quantity Variance

= $3,198.25+ $4,569.25

= $7,767.50 (Unfavorable)

Direct Labour Rate Variance = (Standard Rate- Actual Rate) Actual Hours

= ($12-$12.36)1,440 Hours

= $518.40 (Unfavorable)

Direct Labour Time Variance = (Standard Hours- Actual Hours)Standard Rate

= (2,300 Hours-1,440 Hours)$12

= -$10,320 (Favorable)

Total Direct Labour Cost Variance = Direct Labour Rate Variance + Direct Labour Time Variance

= $518.40- $10,320

= -$9,801.60 (Favorable)