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:

During March, the company purchased direct materials at a cost of $52,740, all of which were used in the production of 2,750 units of product. In addition, 4,500 direct labor-hours were worked on the product during the month. The cost of this labor time was $40,500. The following variances have been computed for the month:

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Required:

1. For direct materials:

a. Compute the actual cost per foot of materials for March.

b. Compute the price variance and the spending variance.

2. For direct labor:

a. Compute the standard direct labor rate per hour.

b. Compute the standard hours allowed for the month’s production.

c. Compute the standard hours allowed per unit of product.

Standard Quantity
or Hours Standard Price
or Rate Standard
Cost Direct materials 3 feet $ 5 per foot $ 15 Direct labor ? hours ? per hour ?

Explanation / Answer

INFORMATION TABLE (actual production - 2750 units) Standard Actual Material Material Qty Rate Cost Qty Rate Cost 8250 5 41250 8790 6 52740 Labour Labour Hour Rate Cost Hour Rate Cost 4400 8.5 37400 4500 9 40500 Working nmotes Calculation of actual qty used 1a Actual cost per unit =Total cost/ toatl qty we have, Material Qty variance =52740/8790 (Std qty-Actual Qty)*Std Rate = 6 (2700)= (8250-actual qty)*5 8790 1b Material price variance Material spending variance (Std rate- actual rate)*actual qty Std cost - actual cost Labour rate variance= labour spending variance- labour efficiency variance =(5-6)-8790 = 41250-52740 = 3100-850 -8790 unfavorable -11490 unfavorab;e 2250 2a we have , Labour ratee variance Calculation of total std labour cost (Std rate-actual rate)*actual hours = Total actual cost- labour spending variance -2250 (Std rate-9)*4500 = 40500-3100 8.5 Std rate 37400 2b Std hour = total std cost/ std rate                  = 37400/8.5                   =4400 hours 2c std hour per unit= total std hour/ no of units                                   = 4400/2750 =    1.6 hours per unit

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