9.6.8

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 50 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Standard wage per hour	$16.20
Standard labor time per unit	15 min.
Standard number of lbs. of brass	1.4 lbs.
Standard price per lb. of brass	$10.75
Actual price per lb. of brass	$11.00
Actual lbs. of brass used during the week	11,248 lbs.
Number of units produced during the week	7,800
Actual wage per hour	$16.69
Actual hours for the week (50 employees 36 hours)	1,800

Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Direct Labor Rate Variance	$___	Unfavorable
Direct Labor Time Variance	$___	Favorable
Total Direct Labor Cost Variance	$___	Favorable

Shasta Fixture Company processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 74,000 units of product were as follows:

	Standard Costs		Actual Costs
Direct materials	192,400 lbs. at $5.00		190,500 lbs. at $4.80
Direct labor	18,500 hrs. at $18.50		18,930 hrs. at $18.90
Factory overhead	Rates per direct labor hr.,
	based on 100% of normal
	capacity of 19,310 direct
	labor hrs.:
		Variable cost, $3.10	$56,780 variable cost
		Fixed cost, $4.90	$94,619 fixed cost

Each unit requires 0.25 hour of direct labor.

Required:

a. 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	$___	Favorable
Direct Materials Quantity Variance	$___	Favorable
Total Direct Materials Cost Variance	$___	Favorable

b. 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	$___	Unfavorable
Direct Labor Time Variance	$___	Unfavorable
Total Direct Labor Cost Variance	$___	Unfavorable

c. Determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Variable factory overhead controllable variance	$___	Favorable
Fixed factory overhead volume variance	$___	Unfavorable
Total factory overhead cost variance	$___	Unfavorable