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 40 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$12.00
Standard labor time per faucet	20 min.
Standard number of lbs. of brass	1.6 lbs.
Standard price per lb. of brass	$10.00
Actual price per lb. of brass	$10.25
Actual lbs. of brass used during the week	12,854 lbs.
Number of faucets produced during the week	7,800
Actual wage per hour	$12.36
Actual hours for the week (40 employees × 32 hours)	1,280 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) 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 (1.6*10)	16
Direct materials standard cost per unit (20/60*12)	4
Total standard cost per unit	20

b) Material variance :

Direct material rate variance = (10-10.25)*12854 = 3214 U

Direct material quantity variance = (7800*1.6-12854)*10 = 3740 U

Direct material cost variance = (7800*16)-(12854*10.25) = 6954 U

c) Labour variance ;

Direct labour rate variance = (12-12.36)*1280 = 461 U

Direct labour efficiency variance = (7800*20/60-1280)*12 = -15840 F

Direct labour cost variance = (7800*4)-(1280*12.36) = -15379 F