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 $54,285, all of which were used in the production of 3,200 units of product. In addition, 4,900 direct labor-hours were worked on the product during the month. The cost of this labor time was $44,100. The following variances have been computed for the month:

Materials quantity variance	$	1,350	U
Labor spending variance	$	3,300	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.

Answer 1

	Materials Quantity variance
	(AQ used - Std Qty allowed)*SR
	(x - 3200*3)*5 =1350U
	5x - 48000 = 1350U
	x	=(1350+48000)/5
		9870
a)	actual cost =		54,285/9870
			5.5	per foot	answer
(
b)	Materials price variance
	(Actual rate - standard rate)*AQ purchased
	(5.5 - 5)*9870
	4935	U	answer
	Spending variance =		1350U+4995
			6285	U	answer
2a)	labor spending varian				3,300	U
	labor efficiency varian				850	U
	labor price variance				2450	U
	labor rate variance = ( Actual rate - standard rate)*Actual hours
			(44,100- x)*4900		=	2,450
			x =	(44100-2450)/4900
				8.5
	Standard hours		8.5	per hour
b)	Standard hours =
	labor efficiency variance
	(Actual hours - standard hours allowed)*Standard rate
	(4900 -x ) *8.5 = 850
	41,650- 8.5x = 850
	x                       = (41650-850)/8.5
		4800
	Standard hours allowed			4,800	hours
c)	Standard hours allowed per unit of product
	4800/3200
	1.5
	Standard hours allowed per unit of product				1.5	hours per unit