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 $58,650, all of which were used in the production of 3,350 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 $39,750. The following variances have been computed for the month:

Materials quantity variance $ 2,250 U
Labor spending variance $ 450 F
Labor efficiency variance $ 1,000 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.)

Solutions

Expert Solution

Materials Quantity variance
(AQ used - Std Qty allowed)*SR
(x - 3350*3)*5 =2250U
5x - 50250 = 2250U
x =(2250+50250)/5
10500
a) actual cost = 58,650/10500
5.59 per foot answer
(
b) Materials price variance
(Actual rate - standard rate)*AQ purchased
(5.9 - 5)*10,500
6150 U answer
Spending variance = 2250+6150
8400 U answer
2a) labor spending varian 450 F
labor efficiency varian 1,000 F
labor price variance 550 U
labor rate variance = ( Actual rate - standard rate)*Actual hours
(39750- x*4900 = 550
x = (39750-550)/4900
8
Standard hours 8 per hour
b) Standard hours =
labor efficiency variance
(Actual hours - standard hours allowed)*Standard rate
(4900 -x ) *8 = 1,000
39200 - 8x = 1000
x                       = (39200+1000)/8
5025
Standard hours allowed 5,025 hours
c) Standard hours allowed per unit of product
5025/3350
1.5
Standard hours allowed per unit of product 1.5 hours per unit

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