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 $55,650, 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 $36,750. The following variances have been computed for the month:

Materials quantity variance	$	4,500	U
Labor spending variance	$	3,150	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.

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

1a

Actual cost

per foot

1b

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. (Round your intermediate value to the nearest whole dollar and final answer to the nearest whole number.)

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

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2a.	Standard direct labor rate per hour
2b.	Standard hours		hours
2c.	Standard hours		hours per unit

Answer 1

1) Material quantity variance = (Standard qty-actual qty)Standard price

-4500X = (3200*3*5-5X)

5X = 48000+4500

X(Actual qty) = 10500

Actual cost per foot = 55650/10500 = 5.30 per foot

2) Material price variance = (5-5.30)*10500 = 3150 U

Material spending variance = (3200*15-55650) = 7650 U

3) Labor rate variance = (Standard rate-actual rate)actual hour

-2450 = (X*4900-36750)

-4900X = -34300

X(Standard rate) = 7

4) Labor efficiency variance = (Standard hour-actual hour)Standard rate

-700 = (X*7-4900*7)

-7X = -33600

x(Standard hour) = 4800 hour

5) Standard hour per unit = 4800/3200 = 1.50 hour per unit