Direct Materials and Direct Labor Variance Analysis Abbeville Company manufactur

Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 70 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows:

Required:

a. Determine the standard cost per faucet 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. 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. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Standard wage per hr. $13.80 Standard labor time per faucet 10 min. Standard number of lb. of brass 1.90 lb. Standard price per lb. of brass $12.50 Actual price per lb. of brass $12.75 Actual lb. of brass used during the week 15,300 lb. Number of faucets produced during the week 7,800 Actual wage per hr. $14.20 Actual hrs. per week 2,240 hrs.

Explanation / Answer

a. Direct materials standard cost per faucet = $    23.75 Direct labour standard cost per faucet = $      2.30 Total standard cost per faucet = $    26.05 Direct materials standard cost per faucet = Standard price X Standard quantity = $12.50 X 1.90 lb = $    23.75 Direct labour standard cost per faucet = Standard wage rate X Standard labor time = ($13.80 / 60 min) X 10 min = $      2.30 b. Price variance =        3,825 Quantity variance =        6,000 Total direct materials cost variance =        9,825 Price variance = (Actual price - Standard price) X Actual quantity = ($12.75 - $12.50) X 15,300 =        3,825 Unfavourable Quantity variance = (Actual quantity - Standard quantity*) X Standard price = (15,300 - 14,820) X $12.50 =        6,000 Unfavourable *Standard quantity = 7,800 X 1.90 lb =      14,820 c. Rate variance =            896 Time variance =      12,972 Total direct labour cost variance =      13,868 Rate variance = (Actual rate per hr - Standard rate per hr) X Actual hrs = ($14.20 - $13.80) X 2,240 hrs =            896 Unfavourable Time variance = (Actual direct labour hrs - Standard direct labour hrs*) X Standard rate per hr = (2,240 - 1,300) X $13.80 =      12,972 Unfavourable * Standard direct labour hrs = (7,800 / 60 min) X 10 min =        1,300

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