Question

Direct Materials and Direct Labor Variance Analysis

Shasta Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 40 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows:

Standard wage per hour $17.40

Standard labor time per unit 20 min.

Standard number of lbs. of brass 1.8 lbs.

Standard price per lb. of brass $9.50

Actual price per lb. of brass $9.75

Actual lbs. of brass used during the week 13,905 lbs.

Number of units produced during the week 7,500

Actual wage per hour   $17.92

Actual hours for the week (40 employees × 40 hours) 1,600

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 $ 17.1

Direct labor standard cost per unit $ 5.8

Total standard cost per unit $ 22.9

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 $ 3,476 Unfavorable

Direct Materials Quantity Variance $ 3,848 Unfavorable

Total Direct Materials Cost Variance $ 7,324 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 $ 832 Unfavorable

Direct Labor Time Variance $ Favorable

Total Direct Labor Cost Variance $ Favorable

Answer 1

Standard Direct Material cost per unit = 1.8*9.50 = $17.1

Direct labor standard cost per unit 17.40*20/60 = $5.8

Total standard cost per unit $ 22.9

Direct material price variance = (Standard Price – Actual price)*Actual quantity

= (9.50 – 9.75)*13905

= $3476.25 U

Direct Material Quantity Variance = (Standard Quantity – Actual Quantity)*Standard Price

= (1.8*7500-13905)9.50

= $3847.5 U

Total = $7323.75 U

c.Labor rate variance = (Standard rate – Actual rate)*Actual hours

= (17.40 – 17.92)*1600

= $832 U

Labor Time variance = (Standard Hours – Actual Hours)*Standard rate

= (7500*20/60 – 1600)*17.40

= $15,660 F

Total = $14,828 F