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 $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.)

Answer 1

	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