Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 30 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$16.2
Standard labor time per unit	15 min.
Standard number of lbs. of brass	2.1 lbs.
Standard price per lb. of brass	$9.25
Actual price per lb. of brass	$9.5
Actual lbs. of brass used during the week	16,223 lbs.
Number of units produced during the week	7,500
Actual wage per hour	$16.69
Actual hours for the week (30 employees × 32 hours)	960 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 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	$	Unfavorable
Direct Materials Quantity Variance	$	Unfavorable
Total Direct Materials Cost Variance	$	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	$	Unfavorable
Direct Labor Time Variance	$	Favorable
Total Direct Labor Cost Variance	$	Favorable

Answer 1

a. Direct materials standard cost per unit = 2.1*9.25 = $19.43
  Direct labor standard cost per unit = 16.20*15/60 = $4.05

Total standard cost per unit = 19.43+4.05 = $23.48

b. Material price variance = (Standard price - actual price)*actual quantity

= (9.25-9.50)*16223 = $4056 unfavorable

Material quantity variance = (Standard quantity - actual quantity)*standard rate

= (7500*2.1-16223)*9.25= $4375 unfavorable

Total Direct Materials Cost Variance = 7500*2.1*9.25-16223*9.5 = $8431 unfavorable

c. Labor rate variance = (standard rate - actual rate)*actual hours

= (16.20-16.69)*960 = $470 unfavorable

Labor efficiency variance = (standard hours - actual hours)*standard rate

= (7500*15/60-960)*16.20 = $-14823 favorable

Total Direct Labor Cost Variance = 7500*15/60*16.20-960*16.69 = $-14353 favorable