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 50 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows:

Standard wage per hr.	$13.20
Standard labor time per faucet	20 min.
Standard number of lb. of brass	2.10 lb.
Standard price per lb. of brass	$9.50
Actual price per lb. of brass	$9.75
Actual lb. of brass used during the week	13,000 lb.
Number of faucets produced during the week	6,000
Actual wage per hr.	$13.60
Actual hrs. per week	2,000 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 unit	$fill in the blank 1
Direct labor standard cost per unit	fill in the blank 2
Total standard cost per unit	$fill in the blank 3

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	$fill in the blank 4
Direct materials quantity variance	fill in the blank 6
Total direct materials cost variance	$fill in the blank 8

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	$fill in the blank 10
Direct labor time variance	fill in the blank 12
Total direct labor cost variance	$fill in the blank 14

Answer 1

a)
Direct materials standard cost per unit	19.95	(2.10*9.50)
Direct labour standard cost per unit	4.40	(13.2*20/60)
Total standard cost per unit	24.35
b)
Direct materials price variance	3,250	Unfavourable	[13,000*(9.75-9.50)]
Direct materials quantity variance	3,800	Unfavourable	[9.50*(13,000-6,000*2.10)]
Total Direct materials cost variance	7,050	Unfavourable	[(13,000*9.75)-(6,000*2.1*9.5)]
C)
Direct labour rate variance	800	Unfavourable	[2,000*(13.6 – 13.2)]
Direct labour time variance	0	-	[13.2*(2,000 – 6,000*20/60)]
Total Direct labour cost variance	800	Favourable	[(2,000*13.6)-(6,000*13.2*20/60)]

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