Direct Materials and Direct Labor Variance Analysis Abbeville Fixture Company ma

Question

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 32 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 $12.00 Standard labor time per faucet 20 min. Standard number of lbs. of brass 1.6 lbs. Standard price per lb. of brass $10.00 Actual price per lb. of brass $10.25 Actual lbs. of brass used during the week 12,854 lbs. Number of faucets produced during the week 7,800 Actual wage per hour $12.36 Actual hours for the week (40 employees × 32 hours) 1,280 hrs.

Explanation / Answer

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

b) Material variance :

Direct material rate variance = (10-10.25)*12854 = 3214 U

Direct material quantity variance = (7800*1.6-12854)*10 = 3740 U

Direct material cost variance = (7800*16)-(12854*10.25) = 6954 U

c) Labour variance ;

Direct labour rate variance = (12-12.36)*1280 = 461 U

Direct labour efficiency variance = (7800*20/60-1280)*12 = -15840 F

Direct labour cost variance = (7800*4)-(1280*12.36) = -15379 F

Direct materials standard cost per unit (1.6*10) 16 Direct materials standard cost per unit (20/60*12) 4 Total standard cost per unit 20

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