Direct Materials and Direct Labor Variance Analysis Abbevill

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 40 hours of labor per week. Information about a production week is as follows:

Required:

a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.

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.

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.

Standard wage per hour	$12.60
Standard labor time per faucet	10 min.
Standard number of lbs. of brass	1.3 lbs.
Standard price per lb. of brass	$12.50
Actual price per lb. of brass	$12.75
Actual lbs. of brass used during the week	10,846 lbs.
Number of faucets produced during the week	8,100
Actual wage per hour	$12.98
Actual hours per week (40 employees × 40 hours)	1,600 hrs.

Solution

a. Direct materials Standard cost per Faucet (1.3*12.50) 16.25 Direct labor standard cost per faucet (12.60*10/60) 2.1 total standard cost per faucet 18.35 b) Materials price variance (Actual price - standard price)*AQ purchased (12.75- 12.50)*10,846 2711.5 U Material qty variance (Actual qty - standard qyt)*Standard price (10,846    - 8,100*1.3)*12.5 3950 U total direct materials cost variance 6661.5 U c) Rate variance (Actual rate - standard rate)*actual hours (12.98-12.60)*1600 608 U Time variance (Actual hours - standard hours)*standard rate (1,600    - 8100*10/60)*12.60 3150 U total direct labor cost variance 3758 U