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

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.

Answer 1

Solution a:

Direct materials standard cost per unit	$4.50
Direct labor standard cost per unit	$10.00
Total standard cost per unit	$14.50

Solution b:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
13000	$1.95	$25,350.00			13000	$1.80	$23,400.00			12500	$1.80	$22,500.00
			$1,950.00	U				$900.00	U
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$1,950.00	U
Direct material quantity variance					$900.00	U
Direct material cost variance					$2,850.00	U

Solution c:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
2660	$18.75	$49,875.00			2660	$20.00	$53,200.00			2500	$20.00	$50,000.00
			$3,325.00	F				$3,200.00	U
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$3,325.00	F
Direct Labor Efficiency variance					$3,200.00	U
Direct labor cost variance					$125.00	F