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 $60,250, all of which were used in the production of 3,430 units of product. In addition, 4,900 hours of direct labor time were worked on the product during the month. The cost of this labor time was $41,350. The following variances have been computed for the month:

Materials quantity variance	$	1,050	U
Labor spending variance	$	190	U
Labor efficiency variance	$	1,960	F

Required:

1. For direct materials:

a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.)

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)).

Price variance
Spending variance

Answer 1

Solution a:

Material Quantity Variance = $1050 U

Standard quantity of Materail for Actual production = $3* 3430 = 10290 feet

Standard Price of material = $5 per foot

Material Quantity Variance = (SQ - AQ) * SP

-1050 = (10290 - AQ) * $5  

AQ = 1050/5 +10290 = 10500 feet

Actual Cost of Direct Material = $60,250

Material actual cost per foot = Total Material Actual cost / material actual quantity = $60,250 / 10500 = $5.74

Solution b:

Material price Variance = (SP- AP) *Actual Quantity = ($5 - $5.738095) * 10500 = $7,750 U

Material Spending Variance = Material Price Variance + Material Quantity Variance

= $7750 U + $1050 U = $ 8800 U