Shasta Fixture Company manufactures faucets in a small manufacturingfacility. The faucets are made from brass. Manufacturing has 70employees. Each employee presently provides 38 hours of labor perweek. Information about a production week is as follows: Standard wage per hr.Standard labor time per faucetStandard number of Ibs. of brassStandard price per lb. of brassActual price per lb. of brassActual Ibs. of brass used during the weekNumber of faucets produced during the weekActual wage per hr.Actual hrs. for the week (70 employees x 38 hours) $20.0030 min.2.5 lbs.$1.80$1.9513,000 lbs.5,000$18.752,660 InstructionsDetermine (a) the standard cost per unit for direct materials and directlabor; (b) the direct materials price variance, direct materials quantityvariance, and total direct materials cost variance; and (c) the direct laborrate variance, direct labor time variance, and total direct labor costvariance.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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. Standard labor time per faucet Standard number of Ibs. of brass Standard price per lb. of brass Actual price per lb. of brass Actual Ibs. of brass used during the week Number of faucets produced during the week Actual wage per hr. Actual hrs. for the week (70 employees x 38 hours) |
$20.00 30 min. 2.5 lbs. $1.80 $1.95 13,000 lbs. 5,000 $18.75 2,660 |
Instructions
Determine (a) the
labor; (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.
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