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

Standard wage per hour	$15.6
Standard labor time per unit	20 min.
Standard number of lbs. of brass	2 lbs.
Standard price per lb. of brass	$10
Actual price per lb. of brass	$10.25
Actual lbs. of brass used during the week	12,360 lbs.
Number of units produced during the week	6,000
Actual wage per hour	$16.07
Actual hours for the week (40 employees × 35 hours)	1,400 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	$
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. 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	$
Direct Labor Time Variance	$
Total Direct Labor Cost Variance	$

Answer 1

a. Direct materials standard cost per unit = Standard number of lb of brass * standard price of brass

= 2*10 = $20

Direct labor standard cost per unit = Standard labor hour per unit * standard wages per hour

= 20/60 * 15.6 = $5.2

Total standard cost per unit = Direct material per unit + direct labor per unit

= 20+5.2 = $25.20

b. Material Price variance = (SP - AP) * AQ

= (10-10.25)*12360 = $3090 Unfavorable

Material quantity variance = (SQ - AQ) * SP

= (6000*2 - 12360)*10 = $3600 Unfavorable

Total direct material cost variance = Material price variance + Material quantity variance

= 3090+3600 = $6990 Unfavorable

c. Labor Rate variance = (SR - AR)* AH

= (15.6-16.07)*1400 = $658 Unfavorable

Labor time variance = (SH - AH) * SR

= (6000*20/60 - 1400)*15.6 = $9360 Favorable

Total direct labor cost variance = Labor rate variance + Labor time variance

= $-658+9360 = $8702 Favorable