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 $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.

Homework Answers

Answer #1

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

-2700 = (2750*3*5-5X)

5X = 41250+2700

X(actual qty) = 43950/5 = 8790

Actual cost per foot = 52740/8790 = 6

1b) Material price variance = (5-6)*8790 = 8790 U

Material spending variance = (2750*15-52740) = 11490 U

2a) Labor rate variance = 3100-850 = 2250 U

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

-2250 = (X*4500-40500)

-4500X = -38250

X(Standard rate) = 8.5

2b) Labor efficiency variance = (standard hour-actual hour)Standard rate

-850 = (X*8.5-4500*8.5)

8.5X = 37400

X(Standard hour) = 4400 Hour

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

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