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 $52,740, all of which were used in the production of 2,750 units of product. In addition, 4,500 hours of direct labor time were worked on the product during the month. The cost of this labor time was $40,500. The following variances have been computed for the month: Materials quantity variance $ 2,700 U Labor spending variance $ 3,100 U Labor efficiency variance $ 850 U

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))

          

For direct labor: (Do not round intermediate calculations.)

a.	Compute the standard direct labor rate per hour. (Round your final answer to 2 decimal places.)

            

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

            

Answer 1

	Materials Quantity variance
	(AQ used - Std Qty allowed)*SR
	(x - 2750*3)*5 =2700U
	5x - 41250 = 2700U
	x	=(2700+41250)/5
		8790
a)	actual cost =		52740/8790
			6	per foot	answer
(
b)	Materials price variance
	(Actual rate - standard rate)*AQ purchased
	(6-5)*8790
	8790	U	answer
	Spending variance =		2700U+8790U
			11490	U	answer
2a)	labor spending varian				3,100	U
	labor efficiency varian				850	U
	labor price variance				2250	U
	labor rate variance = ( Actual rate - standard rate)*Actual hours
			(40500- x*4500		=	2,250
			x =	(40500-2250)/4500
				8.5
	Standard hours		8.5	per hour
b)	Standard hours =
	labor efficiency variance
	(Actual hours - standard hours allowed)*Standard rate
	(4500 -x ) *8.5 = 850
	38250 - 8.5x = 850
	x                       = (38250-850)/8.5
		4400
	Standard hours allowed			4,400	hours
c)	Standard hours allowed per unit of product
	4400/2750
	1.6
	Standard hours allowed per unit of product				1.6	hours per unit