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 $52,965, all of which were used in the production of 2,920 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 $31,500. 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

1a) Material quantity variance = (Standard quantity-actual quantity)Standard price

-4350 = (2920*3*5-5X)

5X = 48150

X = 9630 Foot

Actual cost per foot = 52965/9630 = 5.5 per foot

1b) Material price variance = (5*5.5)*9630 = 4815 U

Material spending variance = (2920*15-52965) = 9165 U

2a) Labour rate variance = (Standard rate-actual rate)Actual hour

-2250 = (4500X-31500)

-4500X = -29250

X(standard rate per hour) = 6.5 per hour

2b)Labour efficiency variance = (Standard hour-actual hour)Standard rate

-780 = (X-4500)*6.5

-780 = 6.5X-29250

-6.5X = -28470

X(standard hour allowed) = 28470/6.5 = 4380 hour

2c) Standard hour allowed per unit = 4380/2920 = 1.5 per unit

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