Direct Materials and Direct Labor Variance Analysis Abbeville Fixture Company ma

Question

Direct Materials and Direct Labor Variance Analysis

Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 40 employees. Each employee presently provides 36 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 Standard labor time per unit 20 min. Standard number of lbs. of brass 1.8 lbs. Standard price per lb. of brass $12.25 Actual price per lb. of brass $12.5 Actual lbs. of brass used during the week 12,793 lbs. Number of units produced during the week 6,900 Actual wage per hour $12.36 Actual hours for the week (40 employees × 36 hours) 1,440 hrs.

Explanation / Answer

Part (a)

Direct Materials Standard Cost Per Unit (Standard Quantity of Brass*Standard Price of Brass) = 1.8 lbs.* $12.25

= $22.05

Direct Labour Standard Cost Per Unit (Standard Labour Time Per Unit*Standard Wage Per Hour) = 20 Min.*$12

= $240

Total Standard Cost Per Unit = $22.05+$240

= $262.05

Part (b) & (c)

Actual Production = 6,900 units

1.8lbs.*6900units

= 12,420lbs.

$12.25

per lb.

20 Min.*6900 units/60

= 2,300 Hours

Direct Materials Price Variance = (Standard Price-Actual Price)Actual Quantity

= ($12.25-$12.5)12,793 lbs.

= $3,198.25 (Unfavorable)

Direct Materials Quantity Variance = (Standard Quantity-Actual Quantity)Standard Price

= (12,420 lbs.- 12,793 lbs.)$12.25

= $4,569.25 (Unfavorable)

Total Direct Materials Cost Variance = Direct Materials Price Variance + Direct Materials Quantity Variance

= $3,198.25+ $4,569.25

= $7,767.50 (Unfavorable)

Direct Labour Rate Variance = (Standard Rate- Actual Rate) Actual Hours

= ($12-$12.36)1,440 Hours

= $518.40 (Unfavorable)

Direct Labour Time Variance = (Standard Hours- Actual Hours)Standard Rate

= (2,300 Hours-1,440 Hours)$12

= -$10,320 (Favorable)

Total Direct Labour Cost Variance = Direct Labour Rate Variance + Direct Labour Time Variance

= $518.40- $10,320

= -$9,801.60 (Favorable)

Standard Actuals

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