Thanks so much for your help. Sharp Company manufactures a product for which the

Question

Thanks so much for your help.

Sharp Company manufactures a product for which the following standards have been set: Standard Qatity Standard Price Standard or Rate $11 per foot ? per hour Cost $33 or Hours Direct materials Direct labor 3 feet ? hours During March, the company purchased direct materials at a cost of $111,300, 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 $95,550. The following variances have been computed for the month: $ 4,400 U $450 F $ 2,000 U Materials quantity variance Labor spending variance Labor 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.

Explanation / Answer

For Materials

Let actual material consumed = AQ

Material quantity variance = SR (SQ - AQ) = 11 ( 9600 - AQ) = - 4400

Note : 9600 feet = 3200 units produced * 3 feet standard qty

9600 - AQ = - 4400 / 11 = - 400

AQ = 9600 + 400 = 10000 Feet

Actual cost per foot of material = 111300 / 10000 = 11.13 ................ final answer for 1(a)

Material price variance = AQ ( SR - AR ) = 10000 ( 11 - 11.13) = 1300 U ......... final answer 2(b)

Spending variance = SR * SQ - AR * AQ = 11 * 9600 - 11.13 * 10000 = 105600 - 111300 = 5700 U ..... 2(b)

For Direct labor

Price variance + efficiency variance = spending variance

x - 2000 = 450

So Price variance = 450 + 2000 = 2450 or 2450 F

AH = Actual hours = 4900, AR = actual rate paid = 95550/4900 = 19.5 per hour and SR = Standard rate paid per hour = ?

AH ( SR - AR) = 2450

4900 ( SR - 19.5) = 2450

SR - 19.5 = 0.50

SR = 20 ............. Final answer for 2(a)

Question - 2 (b)

Efficiency variance = SR ( SH - AH)

= 20 ( SH - 4900) = - 2000

SH - 4900 = - 100

SH = 4800 Hours are allowed

Question - 2 (c)

Standard hours per Unit = 4800 Hours / 3200 = 1.5 hour

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