Problem 10-11 Direct Materials and Direct Labor Variances; Computations from Inc
ID: 2598410 • Letter: P
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 or Rate or Hours 3 feet Cost Direct materials Direct labor $5 per foot15 hours ? per hour During March, the company purchased direct materials at a cost of $45,240, all of which were used in the production of 2,190 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: Materials quantity variance Labor spending variance Labor efficiency variance $1,950 U s 3,030 U $780 UExplanation / Answer
Materials Quantity variance 1,950 U (AQ used -- standard Qty allowed)*Standard rate (x - 2190*3)*5 = 1950 5x - 32,850 = 1950 x = (1950+32850)/5 AQ = 6960 1) a. Actual cost per foot of materials 45,240/6960 6.5 answer b. Material price variance (Actual price - standard price)*AQ purchased (6.5 - 5)*6960 10440 U answer Spending variance 1950 U+10440U 12390 U answer 2) Standard direct labor rate per hour =$6.5 per hour labor spending variance 3,030 U Labor Efficiency variance 780 U labor price variance 2250 U labor price variance (Actual rate - standard rate )*actual hours (31,500 - x)*4500 = 2,250 (31500 - 4500x ) = 2250 x = $7.5 $6.50 answer b) Standard hours allowed labor efficiency variance (Actual hours - standard hours )*stand rate (4500 - x)*6.5 = 780 29250 - 6.5x = 780 x = (29250-780)/6.5 4380 answer c) Standar hours allowed per unit 4380/2190 2 hours per unit allowed
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