Question

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

a. Determine the A detailed estimate of what a product should cost.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 is the difference between the actual and standard prices, multiplied by the actual quantity.price variance, direct materials The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.quantity variance, and total direct materials The difference between actual cost and the flexible budget at actual volumes.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

$

Quantity variance

$

Total direct materials cost variance

$

c. Determine the direct labor The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.rate variance, direct labor The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.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

$

Time variance

$

Total direct labor cost variance

$

Answer 1

Solution a:

Standard number of lb of brass per unit = 3 lb

Standard price per lb of brass = $2.40

Standard Direct material cost per unit = Standard number of lb of brass * standard price of brass = 3*2.40 = $7.20 per unit

Standard labor hours per unit = 40 minutes = 40/60 = 2/3 hours

Standard wages per hour = $15

Standard direct labor cost per unit = Standard labor hour per unit * standard wages per hour = $15*2/3 = $10 per unit

Standard cost per unit = Direct material per unit + direct labor per unit

= $7,20 + $10 = $17.20

Solution b:

Actual production of Faucets = 4800

Standard quantity of material (SQ) = 4800*3 = 14400 lb

Acutal quantity of material (AQ) = 14350 lb

Standard rate of material (SP) = $2.40 per lb

Actual rate of material (AP) = $2.50 per lb

Material Price variance = (SP - AP) * AQ = ($2.40 - $2.50)*14350 = $1,435 U

Material quantity variance = (SQ - AQ) * SP = (14400 - 14350) * 2.40 = $120 F

Total direct material cost variance = Material price variance + Material quantity variance = $1,435 (U) + $120 (F) = $1,315U

Solution c:

Standard hours of labor (SH) = 4800*2/3 = 3200 hours

Actual hours of labor (AH) = 3240 hours

Standard rate of labor (SR) = $15 per hour

Actual rate of labor (AR) = $14.40

Labor Rate variance = (SR - AR)* AH = ($15 - $14.40) * 3240 = $1,944F

Labor time variance = (SH - AH) * SR = (3200 - 3240) * 15 = $600 U

Total direct labor cost variance = Labor rate variance + Labor time variance = $1,944 (F) + $600 (U) = $1,344F