Sharp Company manufactures a product for which the following standards have been set:
|Direct materials||3||feet||$||5||per foot||$||15|
|Direct labor||?||hours||?||per hour||?|
During March, the company purchased direct materials at a cost of $42,660, all of which were used in the production of 2,250 units of product. In addition, 4,600 direct labor-hours were worked on the product during the month. The cost of this labor time was $34,500. The following variances have been computed for the month:
|Materials quantity variance||$||1,800||U|
|Labor spending variance||$||3,000||
|Labor efficiency variance||$||700||
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.
Material quantity variance = $1,800 U
(SQ - AQ)*SP = -$1800
(2250*3 - AQ) * $5 = - $1,800
Actual quantity = 7110 Foot
Actual cost of purchase = $42,660
actual cost per foot = $42,660 / 7110 = $6 per foot
Material price variance = (SP - AP) * AQ = ($5 - $6) * 7110 = $7,110 U
Material spending variance = MPV + MUV = $7,110 U + $1,800 U = $8,910 U
Actual rate of labor per hour = $34,500 / 4600 = $7.50 per hour
Labor rate variance = Labor spending variance - Labor efficiency variance = $3,000 U - $700 U = $2,300 U
(SR - AR) * AH = - $2,300
(SR - $7.50) * 4600 = - $2,300
SR = $7 per hour
Labor efficiency variance = (SH - AH) * SR = (SH - 4600) * $7 = - $700
Standard hours = 4500 hours
Standard hours allowed per unit = 4500 / 2250 = 2 hour per unit.
Get Answers For Free
Most questions answered within 1 hours.