Direct Materials and Direct Labor Variance Analysis Best Faucet Company manufact

Question

Direct Materials and Direct Labor Variance Analysis

Best Faucet Company manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 30 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 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 hour $17.4 Standard labor time per faucet 15 min. Standard number of lbs. of zinc 2.1 lbs. Standard price per lb. of zinc $12.25 Actual price per lb. of zinc $12.5 Actual lbs. of zinc used during the week 19,500 lbs. Number of faucets produced during the week 9,000 Actual wage per hour $17.9 Actual hours per week 1,200 hrs.

Explanation / Answer

Answer a. Direct Material - Zinc - 2.1 lbs X $12.25         25.73 Direct Labor - 0.25 hr X $17.40           4.35 Total Standard Cost per Faucet         30.08 Answer b. Direct Material Price Variance = (SR - AR) X AQ Direct Material Price Variance = ($12.25 - $12.50) X 19,500 lbs Direct Material Price Variance = $4,875 (U) Direct Material Quantity Variance = (SQ - AQ) X SR Direct Material Quantity Variance = (18,900 lbs - 19,500 lbs) X $12.25 Direct Material Quantity Variance = $7,350 (U) Direct Material Price Variance         4,875 (U) Direct Material Quantity Variance         7,350 (U) Direct Material Cost Variance      12,225 (U) Answer c. Direct Labor Rate Variance = (SR - AR) X AH Direct Labor Rate Variance = ($17.40 - $17.90) X 1,200 Hrs Direct Labor Rate Variance = $600 (U) Direct Labor Time Variance = (SH - AH) X SR Direct Labor Time Variance = (2,250 Hrs - 1,200 Hrs) X $17.40 Direct Labor Time Variance = $18,270 (F) Direct Labor Rate Variance            600 (U) Direct Labor Time Variance      18,270 (F) Direct Labor Cost Variance      17,670 (F)

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