Question

Direct Materials and Direct Labor Variance Analysis Abbeville Fixture 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 lbs. of brass 3 lbs. Standard price per lb. of brass $2.40 Actual price per lb. of brass $2.50 Actual lbs. of brass used during the week 14,350 lbs. Number of faucets produced during the week 4,800 Actual wage per hr. $14.40 Actual hrs. for the week (90 employees × 36 hours) 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 $ 7.20 Direct labor standard cost per unit $ 10 Total standard cost per unit $ 17.20 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. Direct Materials Price Variance $ Unfavorable Direct Materials 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. Direct Labor Rate Variance $ Favorable Direct Labor Time Variance $ Unfavorable Total Direct Labor Cost Variance $ Favorable Feedback Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit). Learning Objective 2, Learning Objective 3.

Answer 1

Solution a:

Standard cost of direct material per unit = 3 * $2.40 = $7.20 per unit

Standard cost of direct labor per unit = 40/60*15 = $10 per unit

Total standard cost per unit = $7.20 + $10 = $17.20 per unit

Solution b:

Standard quantity of material for actual production = 4800*3 = 14400 lbs

Standard rate of direct material = $2.40 per lbs

Actual quantity of material used = 14350 lbs

Actual price of direct material = $2.50

Direct material price variance = (SP - AP) * AQ = ($2.40 - $2.50) * 14350 = $1,435 U

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

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

= $1,435 U + $120 F = $1,315 U

Solution c:

Standard hours of direct labor for actual production = 4800 * 40/60 = 3200 hours

Standard rate of labor = $15 per hour

Actual hours of labor = 3240 hours

Actual rate of labor = $14.40 per hour

Direct labor rate variance = (SR - AR) * AH = ($15 -$14.40) * 3240 = $1,944 F

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

Total direct labor cosr variance = Direct labor rate variance + Direct labor time variance

= $1,944 F + $600 U = $1,344 F