Question

Sharp Company manufactures a product for which the following standards have been set:

	Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	3	feet	$	5	per foot	$	15
Direct labor	?	hours		?	per hour		?

During March, the company purchased direct materials at a cost of $59,650, all of which were used in the production of 3,400 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 $40,750. The following variances have been computed for the month:

Materials quantity variance	$	1,500	U
Labor spending variance	$	50	F
Labor efficiency variance	$	1,600	F

Required:

1. For direct materials:

a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.)

b. Compute the price variance and the spending variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance)).

2. For direct labor:

a. Compute the standard direct labor rate per hour. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. Compute the standard hours allowed for the month’s production.

c. Compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

Answer 1

1.Material Quantity Variance=(Standard Quantity - Actual Quantity)*Standard Price

-1,500 = (3*3400 - Actual Quantity)*5

-1,500 = 51,000 - 5*Actual Quantity

Actual Quantity = 10,500 feet

Actual Cost per foot = Total actual cost/actual quantity

= 59,650/10,500

= 5.68 per foot

B. Material Price Variance= (Standard Price - actual price)*Actual Quantity

= standard Price* actual quantity -actual cost

= 5*10,500 - 59,650

= 7,150 U

Material Spending Variance = Standard Cost - Actual Cost

= 10,200*5 - 59,650

= 8,650 U

2. labour Spending Variance= Standard Cost - Actual Cost

50 = Standard Cost - 40,750

Standard Cost = 40,800

Labour Efficiency Variance = (Standard Hours - Actual Hours)*Standard Rate

1,600= (Standard Hours - 4,900)*Standard Rate

1600 = Standard hours* Standard Rate - 4900*Standard Rate

1600 = 40,800 - 4,900*Standard Rate

Standard Rate = $8

B.Standard Hours allowed for month's production = Standard Cost/Standard Rate per Hour

= 40,800/8

= 5,100 hours

C.Standard Hours per Unit = Total Standard Hours/Number of Units

= 5,100/3,400

= 1.5 hours