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 $44,160, 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 $36,000. The following variances have been computed for the month: Materials quantity variance $ 3,150 U Labor spending variance $ 3,100 U Labor efficiency variance $ 700 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

	Materials Quantity variance
	(AQ used - Std Qty allowed)*SR
	(x - 2350*3)*5 =3150U
	5x - 35,250 = 3150U
	x	=(3150+35250)/5
		7680
a)	actual cost =		44,160/7680
			5.75	per foot	answer
(
b)	Materials price variance
	(Actual rate - standard rate)*AQ purchased
	(5.75 - 5)*7680
	5760	U	answer
	Spending variance =		3150U+5760
			8910	U	answer
2a)	labor spending varian				3,100	U
	labor efficiency varian				700	U
	labor price variance				2400	U
	labor rate variance = ( Actual rate - standard rate)*Actual hours
			(36,000- x)*4800		=	2,400
			x =	(36000-2400)/4800
				7
	Standard hours		7	per hour
b)	Standard hours =
	labor efficiency variance
	(Actual hours - standard hours allowed)*Standard rate
	(4800 -x ) *7 = 700
	33,600 - 7x = 700
	x                       = (33600-700))/7
		4700
	Standard hours allowed			4,700	hours
c)	Standard hours allowed per unit of product
	4700/2350
	2
	Standard hours allowed per unit of product				2	hours per unit