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 $57,510, all of which were used in the production of 3,125 units of product. In addition, 5,100 direct labor-hours were worked on the product during the month. The cost of this labor time was $51,000. The following variances have been computed for the month:

Materials quantity variance $ 1,050 U
Labor spending variance $ 3,500

U

Labor efficiency variance $ 950

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 = (SQ-AQ)SP

-1050 = (3125*3*5-5X)

5X = 46875+1050

X(Actual foot) = 9585 foot

actual cost per foot = 57510/9585 = 6 per foot

1b) Material price variance = (5-6)*9585 = 9585 U

Material spending variance = (3125*15-57510) = 10635 U

2a) Labor rate variance = 3500-950 = 2550 U

Labor rate variance = (SR-AR)AH

-2550 = (X*5100-51000)

-5100X = -48450

X(Standard rate per hour) = 9.50

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

-950 = (X*9.50-5100*9.5)

-9.5X = -47500

X(Standard hour) = 5000 Hour

2c) Standard hour per unit = 5000/3125 = 1.60 hour per unit

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