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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct materials and direct labor variance analysis

 Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 90 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hr. $15.00
Standard labor time per faucet 40 min.
Standard number of lb. of brass 3 lb.
Standard price per lb. of brass $2.40
Actual price per lb. of brass $2.50
Actual lb. of brass used during the week 14,350 lb.
Number of faucets produced during the week 4,800
Actual wage per hr. $14.40
Actual hrs. for the week 3,240 hrs.

 Instructions

 Determine (a) the standard cost per unit for direct materials and direct 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.

(a)

To determine

Direct material variances:

The difference between the actual material cost per unit and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

    • Direct materials price variance.
    • Direct materials quantity variance.

Direct labor variances:

The difference between the actual labor cost in the production and the standard labor cost for actual production is known as direct labor cost variance. The direct labor variance can be classified as follows:

    • Labor rate variance.
    • Labor time variance.

To determine: The standard cost per unit for direct materials, and direct labor.

Explanation

Determine the standard cost per unit for direct materials, and direct labor.

Particulars Standard materials and labor cost per faucet
Direct materials     (1)  $7.20
Direct labor           (2) $10.00
  $17.20

Table (1)

Working Notes:

(Standard direct materials cost)=Standard price per lb.×Standard number of lb.=$2.40×3.0 lbs.=$7

(b)

To determine
The direct materials price variance.

(c)

To determine
The direct labor rate variance, direct labor time variance, and total direct labor cost variance.

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