Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 90 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hr.	$15.00
Standard labor time per faucet	40 min.
Standard number of lb. of brass	3 lb.
Standard price per lb. of brass	$2.40
Actual price per lb. of brass	$2.50
Actual lb. of brass used during the week	14,350 lb.
Number of faucets produced during the week	4,800
Actual wage per hr.	$14.40
Actual hrs. for the week	3,240 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 two decimal places, if necessary. 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	$	Favorable
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	$	Favorable
Time variance	$	Unfavorable
Total direct labor cost variance	$	Favorable

Answer 1

• Workings

Actual DATA for		4800	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	14350	$                   2.50	$           35,875.00
Direct labor	3240	$                14.40	$           46,656.00

Standard DATA for		4800	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 3 lbs x 4800 units)=14400 lbs	$                   2.40	$       34,560.00
Direct labor	( 0.666666666666667 hours x 4800 units)=3200 hours	$                15.00	$       48,000.00

• Requirement [a]

Direct materials standard cost per unit (3 x $2.40)	$ 7.20
Direct labor standard cost per unit ($48000 / 4800 units)	$ 10.00
Total standard cost per unit	$ 17.20

• Requirement [b]

Price variance	$ 1,435	Unfavorable
Quantity variance	$ (120)	Favorable
Total direct materials cost variance	$ 1,315	Unfavorable

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                2.40	-	$                       2.50	)	x	14350
	-1435
	Variance		$              1,435.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	14400	-	14350	)	x	$                           2.40
	120
	Variance		$                  120.00			Favourable-F
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                      34,560.00	-	$            35,875.00	)
	-1315
	Variance		$              1,315.00			Unfavourable-U

• Requirement [c]

Rate variance	$ (1,944)	Favorable
Time variance	$ 600	Unfavorable
Total direct labor cost variance	$ (1,344)	Favorable

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              15.00	-	$                    14.40	)	x	3240
	1944
	Variance		$              1,944.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3200	-	3240	)	x	$                        15.00
	-600
	Variance		$                  600.00			Unfavourable-U
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                      48,000.00	-	$            46,656.00	)
	1344
	Variance		$              1,344.00			Favourable-F