23.07.2022 - 19:54

Direct materials and direct labor variance analysis Oasis Faucet Company manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 50 employees. Each em

Question:

Direct materials and direct labor variance analysis Oasis Faucet Company manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 50 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows: Standard wage per hr. $14.50 Standard labor time per faucet 12 min. Standard number of lbs. of zinc 1.8 lbs. Standard price per lb. of zinc$12.00

Actual price per lb. of zinc $11.75 Actual lbs. of zinc used during the week 15,100 lbs. Number of faucets produced during the week 8,000 Actual wage per hr.$15.10

Actual hrs. per week 1,800 hrs.

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

(b) the price variance, quantity variance, and total direct materials cost variance; and

(c) the rate variance, time variance, and total direct labor cost variance.

(a) The standard cost per unit for direct materials can be calculated as follows: Standard cost per unit of zinc = Standard price per lb. of zinc x Standard number of lbs. of zinc = $12.00 x 1.8 lbs. =$21.60 The standard cost per unit for direct labor can be calculated as follows: Standard cost per unit of labor = (Standard wage per hr. / 60 min.) x Standard labor time per faucet = ($14.50 / 60) x 12 min. =$3.48 Therefore, the standard cost per unit for direct materials and direct labor is $21.60 and$3.48, respectively. (b) The price variance for direct materials can be calculated as follows: Price variance = (Standard price per lb. of zinc - Actual price per lb. of zinc) x Actual lbs. of zinc used = ($12.00 -$11.75) x 15,100 lbs. = $3,775 F (Favorable) The quantity variance for direct materials can be calculated as follows: Quantity variance = (Standard number of lbs. of zinc x Actual number of units produced) - Actual lbs. of zinc used = (1.8 lbs. x 8,000) - 15,100 lbs. = 1,900 F The total direct materials cost variance can be calculated as follows: Total direct materials cost variance = Price variance + Quantity variance =$3,775 F + 1,900 F = $1,875 F Therefore, the price variance, quantity variance, and total direct materials cost variance are$3,775 F, 1,900 F, and $1,875 F, respectively. (c) The rate variance for direct labor can be calculated as follows: Rate variance = (Standard wage per hr. - Actual wage per hr.) x Actual hrs. = ($14.50 - $15.10) x 1,800 hrs. =$1,080 F The time variance for direct labor can be calculated as follows: Time variance = (Standard labor time per faucet x Actual number of units produced) - Actual hrs. = (12 min. x 8,000) - 1,800 hrs. = 1,920 U (Unfavorable) The total direct labor cost variance can be calculated as follows: Total direct labor cost variance = Rate variance + Time variance = $1,080 F + 1,920 U =$840 U Therefore, the rate variance, time variance, and total direct labor cost variance are $1,080 F, 1,920 U, and$840 U, respectively.