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 $54,285, all of which were used in the production of 3,200 units of product. In addition, 4,900 direct labor-hours were worked on the product during the month. The cost of this labor time was $44,100. The following variances have been computed for the month:

U

U

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

Solution 1:

Direct material quantity variance = $1,350 U

(SQ - AQ) * SP = -$1,350

(3200 * 3 - AQ) * $5 = -$1,350

= Actual quantity of material purchased = 9870 units

Actual price of direct material = $54,285 / 9870 = $5.50 per unit

Direct material price variance = (SP - AP) * AQ = ($5 - $5.50)* 9870 = $4,935 U
Direct material spending variance = Direct material price variance + direct material quantity variance

= $4,935 U + $1,350 U = $6,285 U

Solution 2:

Labor spending variance = $3,300U

Labor efficiency variance = $850 U

Direct labor rate variance = $3,300 - $850 = $2,450 U

Actual direct labor cost = $44,100

Actual direct labor hours= 4900

Actual rate of direct labor = $44,100 / 4900 = $9 per hour

(SR - AR) * AH = -$2,450

(SR - $9)*4900 = -$2,450

Standard rate of direct labor = $8.50 per hour

Standard direct labor cost = $44,100 - $3,300 = $40,800

Standard hours allowed for month production = $40,800 / $8.50 = 4800 hours

Standard hours allowed per unit = 4800 / 3200 = 1.50 hours per unit

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.