Sharp Company manufactures a product for which the following standards have been

Question

Sharp Company manufactures a product for which the following standards have been set: Standard Quantity Standard Price Stan or Hours 3 feet ? hours or Rate Direct materials Direct labor Cost $5 per foot 15 ?per hour During March, the company purchased direct materials at a cost of $45,180, all of which were used in the production of 2,290 units of product. In addition, 4,700 hours of direct labor time were worked on the product during the month. The cost of this labor time was $32,900. The following variances have been computed for the month Materials quantity variance Labor spending variance Labor efficiency variance $3,130 U $ 780 U 1. For direct materials a. Compute the actual cost per foot for matenials for March. (Round your answer to 2 decimal places.) S 6.00 per foot b. Compute the price variance and the spending vanance. (Do not round intermediate calculations. Type here to search SAMS F2 F3 F4 F5 F6 ESC 3 4. 5 6 Tab

Explanation / Answer

Solution: 1. For Direct materials a. Actual cost $6 per foot Working Notes: material Quantity Variance=(SQ -AQ) x Sp in this formula +ve favorable and -ve is unfavorable -3,300 =((2,290 x 3) - AQ) x 5 -AQ= (-3,300/5) - 6,870 -AQ=-660-6870 -AQ=-7,530 AQ = 7,530 Actual cost per foot = Actual cost / Actual quantity =45,180/ 7,530 = $ 6 per foot b. Price Variance 7,530 U Spending Variance 10,830 U Working Notes: Price Variance = (SP -AP) x AQ in this formula + favorable and -is unfavorable =(5 - 6) x 7,530 = - 7,530 = 7,530 U Spending Variance= Std. Cost - actual cost in this formula + favorable and -is unfavorable =( Sp x SQ ) - (AP x AQ) = (5 x 3 x 2,290) - (6 x 7,530) =34,350 - 45,180 =-10,830 = 10,830 U Lets Check price + Quantity = Spending Variances -7,530 - 3,300 =-10,830 -10,830 = -10,830 hence our above calculation is correct 2). For Direct Labor a. Standard direct labor per hour $6.50 per hour Working Notes: Labor efficiency variance= (Std Hrs -Actual Hrs) x SR in this formula + favorable and -is unfavorable 780 U =( Std Hrs - 4,700 ) x SR -780=(Std Hrs x SR - 4,700xSR) or -780 =(29,770 - 4,700 x SR) see below working notes for value of (Std. Hrs x SR) SR=(29,770 + 780)/4,700 =$6.5 per hrs Notes: Labor spending Variance=( SR x Std. Hrs - AR x Ahrs) 3,130 U= (SR x Std. -Actual cost ) -3,130 = SR x Std. - 32,900 therefore AR x Ahrs = Actual lab. Cost= $32,900 SR x Std. =- 3,130 + 32,900 SR x Std. =$29,770 b. Standard hours allowed for the month production Standard hours 4,580 hours Working Notes: SR x Std. Hrs = $29,770 as calculated above $6.50 x Std. Hrs = $29,770 SR = $6.50 from 2 a. Standard hours = $29,770/$6.50 Standard hours = 4,580 hours C. Standard hours allowed per unit of product 2 hours per unit Working Notes: St. hrs per unit of product = Std Hrs /actual units produced. =4,580/2,290 =2 hrs per unit of products Please feel free to ask if anything about above solution in comment section of the question.

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