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.

For direct materials, compute the actual cost per foot of materials for March. (Round your answer to 2 decimal places.)

	Actual cost    per foot

For direct materials, 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). Input all amounts as positive values.)

	Price variance    Spending variance

2a. For direct labor, compute the standard direct labor rate per hour. (Round your answer to the nearest whole dollar.)

2b. For direct labor, compute the standard hours allowed for the month’s production. (Do not round your intermediate value.)

2c. For direct labor, compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

	2a. Standard direct labor rate per hour    2b. Standard hours allowed for the month’s production 2c. Standard hours allowed per unit of product

  

Answer 1

	Materials Quantity variance
	(AQ used - Std Qty allowed)*SR
	(x - 2750*3)*5 =2700U
	5x - 41250 = 2700U
	x	=(2700+41250)/5
		8790
a)	actual cost =		52740/8790
			6	per foot	answer
(
b)	Materials price variance
	(Actual rate - standard rate)*AQ purchased
	(6 -5)*8790
	8790	U	answer
	Spending variance =		2700U+8790U
			11490	U	answer
2a)	labor spending varian				3,100	U
	labor efficiency varian				850	U
	labor price variance				2250	U
	labor rate variance = ( Actual rate - standard rate)*Actual hours
			(40,500- x*4500)		=	2,250
			x =	(40500-2250)/4500
				8.5
	Standard hours		8.5	per hour
b)	Standard hours =
	labor efficiency variance
	(Actual hours - standard hours allowed)*Standard rate
	(4500 -x ) *8.5 = 850
	38250 - 8.5x = 850
	x                       = (38250-850)/8.5
		4400
	Standard hours allowed			4,400	hours
c)	Standard hours allowed per unit of product
	4400/2750
	1.6
	Standard hours allowed per unit of product				1.6	hours per unit