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 30 employees. Each employee presently provides 35 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$13.80
Standard labor time per unit	20 min.
Standard number of lbs. of brass	1.4 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	12,545 lbs.
Number of units produced during the week	8,700
Actual wage per hour	$14.21
Actual hours for the week (30 employees × 35 hours)	1,050

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 = Standard number of lbs. of brass x Standard price per lb. of brass

=1.4*9.50 = $13.30 per unit

Direct labor standard cost per unit = Standard labor time per unit x Standard wage per hour

= (20/60)*13.80 = $4.60 per unit

Total standard cost per unit = $13.30 per unit + $4.60 per unit = $17.90 per unit

b. Direct Materials Price Variance = (9.75-9.50)*12545 = $3,136 Unfavorable

Direct Materials Quantity Variance = (12,545-8,700*1.40)*9.50 = 3468 Unfavorable

Total Direct Materials Cost Variance =12545*9.75-8700*13.30 =$6604 unfavorable

c. Direct Labor Rate Variance =(14.21-13.80)*1050 = $431 unfavorable

Direct Labor Time Variance =(1050-8700*20/60)*13.80 = $-25530 favorable

Total Direct Labor Cost Variance =1050*14.21-8700*4.60 = $-25100 favorable