Question

# Sharp Company manufactures a product for which the following standards have been set: Standard Quantity or...

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.

 Actual cost per foot

b. 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

2. For direct labor:

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

1a.
Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
\$3450 = (Actual Quantity - 2750x3) x \$5
Actual Quantity = 8940 feet

Actual cost per foot = \$49170 / 8940 = \$5.50 per foot

1b.
Material Price Variance = (Actual Price - Standard Price) x Actual Quantity
= (\$5.50 - 5) x 8940 = \$4470 (U)

Spending Variance = \$3450+4470 = \$7920 (U)

2a.
Labor Spending variance = Actual labor cost - Standard Labor cost
Standard Labor cost = \$36000-3000 = \$33000

Labor efficiency Variance = Actual hours x Standard rate - Standard labor cost
\$750 = 4500 x Standard rate - \$33000
Standard rate = \$7.50 per hour

2b. Standard hours allowed = \$33000/7.50 = 4400 hours

2c. Standard hours per unit = 4400/2750 = 1.60 hours per unit

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