Question

In: Accounting

Sharp Company manufactures a product for which the following standards have been set: Standard Quantity or...

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 direct labor-hours 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

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.

Solutions

Expert Solution

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+8790
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
(40,500- 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

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