Question

Bob's 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

1)	total material variance
	material quantity variance
	(AQ used - standard qty allowed)*standard rate
	(x             - 3*2350)5		= 3,150
	5x - 35,250         =3150
	x                           = (3150+35250)/5
			7680
a)	actual cost per foot of materials = 44160/7680
				5.75	answer
b)	material price variance
	(Actual rate - standard rate )*Actual qty
	(5.75-5)*7680
	5760	U	answer
	Spending variance
	3150U+5760U
	8910	U	answer
2)	labor spending variance				3,100	U
	labor efficiency variance				700	U
	labor price variance				2400	U
a)	labor rate variance
	(Actual rate - standard rate )*actual hrs
	(36,000           - x*4800)=2400
	x                     = (36000-2400)/4800
		7	answer
b)	Standard hrs allowed
	(Actual hr- standard hrs allowed)*standard rate
	(4800 - x)*7 = 700
	33,600 - 7x    = 700
	x                    = (33600-700)/7
		4700	answer
c)	standard hrs allowed per unit
	4700/2350
	2	per hr	answer