Faucet Industries Inc. manufactures faucets in a small manufacturing facility. T

Question

Faucet Industries Inc. manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Faucet Industries has 30 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows Standard wage per hour Standard labor time per faucet Standard number of lbs. of zinc Standard price per lb. of zinc Actual price per lb. of zinc Actual lbs. of zinc used during the week Number of faucets produced during the week Actual wage per hour Actual hours per week $16.80 20 min. 1.9 lbs. $10.00 $10.25 14,100 lbs. 7,200 $17.30 1,200 hrs.

Explanation / Answer

(a) Computation of Standard Cost of per Faucet (i) Direct material standard cost per faucet Standard number of lbs. of zinc 1.9 Standard price per lb. of zinc 10 Direct material standard cost per faucet (1.9*10) 19 (ii) Direct Labor standard cost per faucet Standard number of hours per faucet (20 Minutes/60 Minutes) 0.33333 Standard wage per hour 16.8 Direct Labour standard cost per faucet (16.8*0.3333) 5.6 (b ) Direct Material variances: Direct Material Standard Price (SP) $10.00 Standard Quantity (SQ) [7200*1.9]           13,680 Actual Quantity (AQ)           14,100 Actual price (AP) $10.25 Material Price Variance: AQ X SP Minus AQ X AP        14,100 X $10.00 Minus     14,100 X $10.25                                        1,41,000 Minus                                     1,44,525         (3,525) Unfavourable Material Quantity Variance: SQ X SP Minus AQ X SP        13,680 X $10.00 Minus     14,100 X $10.00                                        1,36,800 Minus                                     1,41,000         (4,200) Unfavourable Total Direct Material cost Variance: SQ X SP Minus AQ X AP        13,680 X $10.00 Minus     14,100 X $10.25                                        1,36,800 Minus                                     1,44,525         (7,725) Unfavourable (c ) Direct Labour variances: Direct Labour Standard Rate (SR) $16.80 Standard Hours (SH) ([20/60]*7200)       2,400 Actual Hours (AH)       1,200 Actual Rate (AR) $17.30 Labour Rate Variance: AH X SR Minus AH X AR                                 1,200 X $16.80 Minus       1,200 X 17.30                                                                        20,160 Minus                                       20,760              (600) Unfavourable Labour Efficiency Variance: SH X SR Minus AH X SR                                 2,400 X $16.80 Minus       1,200 X $16.80                                                                        40,320 Minus                                       20,160          20,160 Favourable Total Direct Labour cost Variance: SH X SR Minus AH X AR                                 2,400 X $16.80 Minus       1,200 X $17.30                                                                        40,320 Minus                                       20,760          19,560 Favourable

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