Problem Series: Direct Materials and Direct Labor Variance Analysis Oasis Faucet

Question

Problem Series: Direct Materials and Direct Labor Variance Analysis Oasis Faucet Company manufacturers faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 80 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows: ons $16.80 Standard wage per hr 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 12,000 Actual wage per hr Actual hrs, for the week Instructions Determine (a) the standard cost per unit for direct materials and direct labor; 15 min 2.6 lbs $22.00 $21.85 31,750 lbs $17.00 3,200 hrs (b) the direct materials price variance, direct materials quantity variance, and total direct materials cost variance; and (c) the direct labor rate variance, direct labor time variance, and total direct labor cost variance

Explanation / Answer

a) Standard cost per unit :

Direct material = (2.6*22) = 57.20 per unit

Direct labour   = (16.80*.25) = 4.20 per unit

b) Direct material variance :

Direct material price variance = (Standard price-actual price)actula quantity

                                           = (22-21.85)31750

Direct material price variance = 4762.50 F

Direct material quantity variance = (Standard quantity-actual quantity)standard price

                                                 = (12000*2.6-31750)22

Direct material quantity variance = 12100 U

Direct material cost variance = (standard cost-actual cost)

                                           = (12000*57.20)-(31750*21.85)

Direct material cost variance = 7337.50 U

b) Direct Labour variance :

Direct labour rate variance = (Standard rate-actual rate)actual hours

                                           = (16.80-17)3200

Direct labour rate variance = 640 U

Direct labour efficiency variance = (Standard hours-actual hours)standard rate

                                                 = (12000*.25-3200)16.80

Direct labour efficiency variance = 3360 U

Direct labour cost variance = (standard cost-actual cost)

                                           = (12000*4.20)-(3200*17)

Direct labour cost variance = 4000 U

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