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 $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.

Answer 1

INFORMATION TABLE (actual production - 2750 units)

Standard

Actual

Material

Material

Qty

Rate

Cost

Qty

Rate

Cost

8250

5

41250

8790

6

52740

Labour

Labour

Hour

Rate

Cost

Hour

Rate

Cost

4400

8.5

37400

4500

9

40500

Working nmotes

Calculation of actual qty used

1a

Actual cost per unit

=Total cost/ toatl qty

we have, Material Qty variance

=52740/8790

(Std qty-Actual Qty)*Std Rate

= 6

(2700)= (8250-actual qty)*5

8790

1b

Material price variance

Material spending variance

(Std rate- actual rate)*actual qty

Std cost - actual cost

Labour rate variance= labour spending variance- labour efficiency variance

=(5-6)-8790

= 41250-52740

= 3100-850

-8790 unfavorable

-11490

unfavorab;e

2250

2a

we have , Labour ratee variance

Calculation of total std labour cost

(Std rate-actual rate)*actual hours

= Total actual cost- labour spending variance

-2250

(Std rate-9)*4500

= 40500-3100

8.5

Std rate

37400

2b

Std hour = total std cost/ std rate

= 37400/8.5

=4400 hours

2c

std hour per unit= total std hour/ no of units

= 4400/2750

=    1.6 hours per unit