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 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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EX.22-18.BLANKSHEET.ALGO

EX.22-21.BLANKSHEET

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PR.22-01A.ALGO

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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

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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	$

Answer 1

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