In: Accounting
Direct Materials and Direct Labor Variance Analysis
Best Faucet Company manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 30 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows:
Standard wage per hour | $17.4 |
Standard labor time per faucet | 15 min. |
Standard number of lbs. of zinc | 2.1 lbs. |
Standard price per lb. of zinc | $12.25 |
Actual price per lb. of zinc | $12.5 |
Actual lbs. of zinc used during the week | 19,500 lbs. |
Number of faucets produced during the week | 9,000 |
Actual wage per hour | $17.9 |
Actual hours per week | 1,200 hrs. |
Required:
a. Determine the standard cost per faucet for direct materials and direct labor. Round the cost per unit to two decimal places.
Direct materials standard cost per faucet | $ |
Direct labor standard cost per faucet | $ |
Total standard cost per faucet | $ |
b. Determine the direct materials price variance, direct materials 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 | $ | Unfavorable |
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. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Rate variance | $ | Unfavorable |
Time variance | $ | Favorable |
Total direct labor cost variance | $ | Favorable |
Answer a. | |||
Direct Material - Zinc - 2.1 lbs X $12.25 | 25.73 | ||
Direct Labor - 0.25 hr X $17.40 | 4.35 | ||
Total Standard Cost per Faucet | 30.08 | ||
Answer b. | |||
Direct Material Price Variance = (SR - AR) X AQ | |||
Direct Material Price Variance = ($12.25 - $12.50) X 19,500 lbs | |||
Direct Material Price Variance = $4,875 (U) | |||
Direct Material Quantity Variance = (SQ - AQ) X SR | |||
Direct Material Quantity Variance = (18,900 lbs - 19,500 lbs) X $12.25 | |||
Direct Material Quantity Variance = $7,350 (U) | |||
Direct Material Price Variance | 4,875 | (U) | |
Direct Material Quantity Variance | 7,350 | (U) | |
Direct Material Cost Variance | 12,225 | (U) | |
Answer c. | |||
Direct Labor Rate Variance = (SR - AR) X AH | |||
Direct Labor Rate Variance = ($17.40 - $17.90) X 1,200 Hrs | |||
Direct Labor Rate Variance = $600 (U) | |||
Direct Labor Time Variance = (SH - AH) X SR | |||
Direct Labor Time Variance = (2,250 Hrs - 1,200 Hrs) X $17.40 | |||
Direct Labor Time Variance = $18,270 (F) | |||
Direct Labor Rate Variance | 600 | (U) | |
Direct Labor Time Variance | 18,270 | (F) | |
Direct Labor Cost Variance | 17,670 | (F) |