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: Standard Price or Rate $5 per foot ? per hour Standard Cost $ 15 Standard Quantity Direct materials Direct labor or Hours 3feet ?hours During March, the company purchased direct materials at a cost of $59,850, all of which were used in the production of 3,410 units of product. In addition, 4,900 hours of direct labor time were worked on the product during the month. The cost of this labor time was $40,950. The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance $1,350 U $30 U $1,720 F Required 1. For direct materials: a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.) tual cost per foot

Explanation / Answer

1. Material quantity variance = (standard quantity-actual quantity)standard price

-1350 = (3410*3-X)5

-1350 = (51150-5X)

5X = 51150+1350 = 52500

X(Actual quantity) = 52500/5 = 10500

Actual cost per foot = 59850/10500 = 5.7 per foot

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

= (5-5.70)10500

Material price variance = 7350 U

Material spending variance = (standard cost-actual cost)

= (3410*15-59850)

Material spending variance = 8700 U

2) Labour variance :

Labour rate variance = 1720+30 = 1750 U

Labour rate variance = (Standard rate-actual rate)actual hours

-1750 = (4900X-40950)

-4900 X = -39200

X(standard rate ) = 8 per hour

Labour efficiency variance = (Standard hours-actual hours)standard rate

1720 = (X*8-4900*8)

1720 = 8x-39200

-8X = 40920

X(standard hours allowed ) = 5115 Hours

C) Standard hours allowed per unit = 5115/3410 = 1.5 per unit

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