Question

Direct Materials and Direct Labor Variance Analysis

Shasta Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 70 employees. Each employee presently provides 38 hours of labor per week. Information about a production week is as follows:

Standard wage per hr.	$20.00
Standard labor time per faucet	30 min.
Standard number of lbs. of brass	2.5 lbs.
Standard price per lb. of brass	$1.80
Actual price per lb. of brass	$1.95
Actual lbs. of brass used during the week	13,000 lbs.
Number of faucets produced during the week	5,000
Actual wage per hr.	$18.75
Actual hrs. for the week (70 employees × 38 hours)	2,660

Required:

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

Direct materials standard cost per unit	$
Direct labor standard cost per unit	$
Total standard cost per unit	$

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.

Direct Materials Price Variance	$
Direct Materials Quantity Variance	$
Total Direct Materials Cost Variance	$

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.

Direct Labor Rate Variance	$
Direct Labor Time Variance	$
Total Direct Labor Cost Variance	$

Answer 1

a
Direct materials standard cost per unit	4.50	=2.5*1.8
Direct labor standard cost per unit	10.00	=20*(30/60)
Total standard cost per unit	14.50
b
Direct Materials Price Variance	1950	Unfavorable	=13000*(1.95-1.8)
Direct Materials Quantity Variance	900	Unfavorable	=1.8*(13000-5000*2.5)
Total Direct Materials Cost Variance	2850	Unfavorable	=(13000*1.95)-(5000*2.5*1.8)
c
Direct Labor Rate Variance	-3325	Favorable	=2660*(18.75-20)
Direct Labor Time Variance	3200	Unfavorable	=20*(2660-5000*30/60)
Total Direct Labor Cost Variance	-125	Favorable	=(2660*18.75)-(5000*30/60*20)