Question

Problem 10-11 (Algo) Direct Materials and Direct Labor Variances; Computations from Incomplete Data [LO10-1, LO10-2]

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 $49,170, 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 $36,000. The following variances have been computed for the month:

Materials quantity variance	$	3,450	U
Labor spending variance	$	3,000	U
Labor efficiency variance	$	750	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.

Complete this question by entering your answers in the tabs below.

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

Req 1A

Actual Cost

per foot

Req 1B

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

Req 2

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

1a) Material quantity variance = (SQ-AQ)SP

-3450 = (2750*3*5-5X)

5X = 41250+3450

X(Actual foot) = 44700/5 = 8940

Actual Cost per foot = 49170/8940 = 5.5

1b) Material price variance = (5-5.5)*8940 = 4470 U

Material spending variance = (2750*15-49170) = 7920 U

2a) Labor rate variance = 3000-750 = 2250 U

Labor rate variance = (SR-AR)AH

-2250 = (X*4500-36000)

-4500X = -33750

X(Standard labor rate per hour) = 33750/4500 = 7.5

2b) Labor efficiency variance = (SH-AH)SR

-750 = (X*7.5-4500*7.5)

-7.5X = -33000

X(Standard hour) = 4400 Hour

2c) Standard hour per unit = 4400/2750 = 1.60 hour per unit