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 $44,100, all of which were used in the production of 2,350 units of product. In addition, 4,800 direct labor-hours were worked on the product during the month. The cost of this labor time was $40,800. The following variances have been computed for the month: Materials quantity variance $ 1,500 U Labor spending variance $ 3,200 U Labor efficiency variance $ 800 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.

Answer 1

Ans:

1. Actual cost per foot of materials for March =Direct Materials Cost/Actual Quantity

Material Quantity Variance= Actual Quantity used -Standard Quantity Allowed)* Standard Rate

1,500= Actual Quantity Used- 2,350*3)*5

1,500/5= Actual Quantity used- 7,050

300= Actual Quantity used- 7,050

Actual Quantity used= 7,350

Actual Cost per foot of Materials= 44,100/7,350

=> $6 per foot

2. Materials Price Variance= Actual rate-standard Rate)* Actual Quantity purchased

=> 6-5)*7,350

=> 7,350 Unfavorable

Spending Variance= 7,350+ 1,500

=> 8,850

B).

1. Labor Rate Variance= Actual rate-Standard Quantity)*Actual Hours

Labor Price Variance= Labor Spending Variance- labor efficiency Variance

=> 3,200-800

=> $2,400

2,400= 40,800-X)*4,800

x= 40,800-2,400/4,800

X= 38,400/4,800

X= $8 per Hour

2. Standard Hours= Labor efficiency Variance

Actual Hours-Standard hours allowed )*standard Rate

4,800-X)8= 800

38,400-8x=800

38,400-800=8X

37,600=8X

X= 4,700 hours

3. Standard hours allowed per unit of product= Standard hours allowed/ Units used in production

=> 4,700/2,350

=> $2