Direct Materials and Direct Labor Variance Analysis Faucet Industries Inc. manuf

Question

Direct Materials and Direct Labor Variance Analysis

Faucet Industries Inc. manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 60 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hr: $18

Standard labor time per faucet: 12 min

Standard number of lbs of zinc: .80 lb.

Standard price per lb of zinc: $1.25

Actual price per lb. of zinc: $1.40

Actual lbs of zinc used during the week: 10,200 lbs.

Number of faucets produced during the week: 12,000

Actual wage per hr: $18.75

Actual hrs per week: 2,160 hrs

a. Determine the standard cost per unit for direct materials and direct labor.

Direct materials standard cost per faucet: $1

Direct labor standard cost per faucet: ____

b. Determine the direct labor price variance, direct labor quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Price variance: $____ Unfavorable

Quantity variance: ____Unfavorable

c. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Rate Variance: $____ Unfavorable

Time variance: ____ Favorable

Explanation / Answer

a)Standard direct material cost per faucet = .80 * 1.25 =$ 1

Standard direct labor cost per faucet = 12 min *18 per hour /60 min = $ 3.60

b) Material price variance = AQ (AP -SP)

                                            = 10200 (1.40 - 1.25)

                                           = 10200 *.15

                                           = 1530 (U)

Quantity variance = SR (AQ -SQ)

                                 = 1.25 [10200 - ( 12000* .80) ]

                                 = 1.25[10200 - 9600]

                                = 750 U

3)Labor price variance = AH (AR-SR)

                                      = 2160 (18.75 - 18)

                                       = 2160 *.75

                                       = 1620 (U)

Time variance = SR (AH-SH)

                         = 18 [2160 - (12000 * 12/60) ]

                         = 18[2160 - 2400]

                        = 18 * -240

                        = - 4320 F

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