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	$
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. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Materials Price Variance	$
Direct Materials Quantity Variance	$
Total Direct Materials Cost Variance	$

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	$
Direct Labor Time Variance	$
Total Direct Labor Cost Variance	$

Answer 1

	a	Direct materials standard cost per unit(3lbs*2.4)	$7.2
		Direct labor standard cost per unit($15*40/60)	$10
		Total standard cost per unit	$17.2
	b	Direct Materials Price Variance($2.4*14350lbs)-(14350lbs*$2.5)	$1435	unfavourable
		Direct Materials Quantity Variance(7.2*4800)-(2.4*14350)	-$120	favourable
		Total Direct Materials Cost Variance	$1315	unfavourable
	c	Direct Labor Rate Variance=3240hrs*($15-$14.4)	-$1944	favourable
		Direct Labor Time Variance($10*4800)-($15*3240)	$600	unfavourable
		Total Direct Labor Cost Variance	-$1344	favourable