Problem 10-11 Direct Materials and Direct Labor Variances; Computations from Inc

Question

Problem 10-11 Direct Materials and Direct Labor Variances; Computations from Incomplete Data [LO10-1, LO10-2] Sharp Company manufactures a product for which the following standards have been set: Standard Quantity Standard Price Standard Direct materials Direct labor or Hours 3 feet ? hours or Rate $5 per foot ? per hour Cost $ 15 During March, the company purchased direct materials at a cost of $53,730, all of which were used in the production of 2,875 units of product. In addition, 4,700 direct labor-hours were worked on the product during the month. The cost of this labor time was $37,600 The following variances have been computed for the month Materials quantity variance Labor spending variance Labor efficiency variance $ 1,650 U 3,100 U $ 750 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. Complete this question by entering your answers in the tabs below

Explanation / Answer

AQ = Actual Quantity, SQ = Standard Quantity, AP = Actual Price, SP = Standard Price AH = Actual Hours, SH = Standard Hours, AR = Actual Rate , SR = Standard Rate Requirement 1 for direct materials a. Actual Cost per foot of materials for March Material Quantity Variance = (Standard Quantity for Actual Output - Actual Quantity) X Standard Price 1650 U= [(2875x3) - AQ] X 5 -1650/5 =8625-AQ    AQ =  8625+330 =8955 Actual cost per foot =53,730/8955 = $6 per Foot Requirement 1-b Material Price Variance = (Standard Price - Actual Price) X Actual Quantity Consumed = [5 - 6] X 8955= 8,955 Unfavourable Material Spending Variance =Material Price Variance + Material Quantity variance                     = 8955 U + 1650U= 10,605 U Requirement 2 for direct labour a. Standard direct labour rate per hour Labour Spending variance = Labor rate variance +Labor Efficiency variance 3100 U =labor rate variance + 750 U Labour Rate Variance = $2,350 Unfavourable Labour Rate Variance = (Standard rate - Actual rate) X Actual Hours Labour Rate Variance =SRXAH -ARXAH 2350 U =SRX4700 -53730 53730-2350 =SRX4700 Standard Rate = 51,380/4700 = $11 per Hour Requirement 2-b Labour Efficiency Variance = (Standard Hours for Actual Output - Actual Hours worked ) X Standard rate 750U =(Standard Hours for Actual Output -4700 ) X $11 750 U/ $11 =Standard Hours for Actual Output -4700 Standard Hours for Actual Output=-68 + 4700 =4,632 Hours Requirement 2-c Standard hours allowed per unit of prouduct = 4,632Hours /2,875 units =   1.6 hours per unit of product

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