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 50 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:
Standard wage per hour | $13.8 |
Standard labor time per unit | 20 min. |
Standard number of lbs. of brass | 1.7 lbs. |
Standard price per lb. of brass | $11 |
Actual price per lb. of brass | $11.25 |
Actual lbs. of brass used during the week | 14,708 lbs. |
Number of units produced during the week | 8,400 |
Actual wage per hour | $14.21 |
Actual hours for the week (50 employees × 32 hours) | 1,600 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 |
Chapter 22 Homework (Application)
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Flexible Budgeting and Variance Analysis
I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:
Standard Amount per Case | ||||||
Dark Chocolate | Light Chocolate | Standard Price per Pound | ||||
Cocoa | 10 lbs. | 7 lbs. | $4.60 | |||
Sugar | 8 lbs. | 12 lbs. | 0.60 | |||
Standard labor time | 0.4 hr. | 0.5 hr. |
Dark Chocolate | Light Chocolate | |||
Planned production | 4,000 cases | 9,800 cases | ||
Standard labor rate | $16.50 per hr. | $16.50 per hr. |
I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:
Dark Chocolate | Light Chocolate | |||
Actual production (cases) | 3,800 | 10,200 | ||
Actual Price per Pound | Actual Pounds Purchased and Used | |||
Cocoa | $4.70 | 109,900 | ||
Sugar | 0.55 | 149,000 | ||
Actual Labor Rate | Actual Labor Hours Used | |||
Dark chocolate | $16.00 per hr. | 1,380 | ||
Light chocolate | 17.00 per hr. | 5,230 |
Required:
1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:
a. Direct materials price variance, direct materials quantity variance, and total variance.
b. Direct labor rate variance, direct labor time variance, and total variance.
Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If there is no variance, enter a zero.
a. | Direct materials price variance | $ | Unfavorable |
Direct materials quantity variance | $ | Unfavorable | |
Total direct materials cost variance | $ | Unfavorable | |
b. | Direct labor rate variance | $ | Unfavorable |
Direct labor time variance | $ | Favorable | |
Total direct labor cost variance | $ | Unfavorable |
\
Factory Overhead Variance Corrections
The data related to Shunda Enterprises Inc.’s factory overhead cost for the production of 20,000 units of product are as follows:
Actual: | Variable factory overhead | $68,300 |
Fixed factory overhead | 49,700 | |
Standard: | 30,000 hrs. at $4 ($2.30 for variable factory overhead) | 120,000 |
Productive capacity at 100% of normal was 28,900 hours, and the factory overhead cost budgeted at the level of 30,000 standard hours was $119,300. Based on these data, the chief cost accountant prepared the following variance analysis:
Variable factory overhead controllable variance: | |||
Actual variable factory overhead cost incurred | $68,300 | ||
Budgeted variable factory overhead for 30,000 hours | 69,000 | ||
Variance—favorable | $(700) | ||
Fixed factory overhead volume variance: | |||
Normal productive capacity at 100% | 28,900 | hrs. | |
Standard for amount produced | 30,000 | ||
Productive capacity not used | 1,100 | hrs. | |
Standard variable factory overhead rate | x $4 | ||
Variance—unfavorable | 4,400 | ||
Total factory overhead cost variance—unfavorable | $3,700 |
Compute the following to assist you in identifying the errors in the factory overhead cost variance analysis. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.
Variance | Amount | Favorable/Unfavorable |
Variable Factory Overhead Controllable Variance | $ | Favorable |
Fixed Factory Overhead Volume Variance | $ | Favorable |
Total Factory Overhead Cost Variance | $ |
As per policy, only one question is allowed to answer at a time, so answering Q1 :
Q1)
Standard cost per unit: | ||||||
Direct Material standard cost per unit | 1.7*11 | =18.7 | ||||
Direct Labor standard cost per unit | (20/60)*13.8 | =4.6 | ||||
Total Standard cost per unit | =$23.30 | |||||
DMPV = (Actual cost - Standard cost)Actual usage = (11.25-11)*14708 | =3677 | U | ||||
DMQV = (Std usage of actual units - actual usage)Std price = (8400*1.7-14708)*11 | =4708 | U | ||||
TDMCV= DMPV+DMQV | =8385 | U | ||||
DLRV = (Actual rate - Standard rate)Actual usage = (14.21-13.8)*1600 | =656 | U | ||||
DLEV = (Std Hours of actual units - actual hours)Std rate = (8400*20/60-1600)*13.80 | =16560 | U | ||||
TDLCV= DLRV+DLEV= | =17216 | U |
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