Sharp Company manufactures a product for which the following standards have been

Question

Sharp Company manufactures a product for which the following standards have been set:

     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 hours of direct labor time 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:

Material variance $1050 U

Labor Spending variance: $3,500 U

Labor Efficiency variance: $ 950 U

Compute the standard direct labor rate per hour. (Do not round intermediate calculations.)

Compute the standard hours allowed for the month’s production.

Compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

          

Standard Quantity
or Hours Standard Price
or Rate Standard
Cost   Direct materials 3 feet $ 5 per foot $ 15   Direct labor ? hours ? per hour ? Required or direct materials: a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.) ctual 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

Explanation / Answer

a. Actual cost per foot of material (X) =

Material Price Variance = -1050 = ( 5 - X ) 57510/X

solving for X, we get

X = Actual cost per foot of material = $5.09

b.

Actual quantity of material required for production = $57510 / $5.09 = 11298 feet

Material Price Variance = ( 5 - 5.09) 11298 = $1017 UF

Material Quantity Variance = ( 3125*3 - 11298 ) $5 = $9615 UF

Material Spending Variance = Standard cost for actual production - Actual cost = 15 * 3125 - 57510 = 10632UF

FOR LABOR:

First take, Labor Spending variance = - $3,500 = Standard Labor cost of actual production - Actual labor cost

=> Standard Labor cost of actual production - $51000 = - $3,500

=> Standard Labor cost of actual production = $47500

Standard Cost per unit = $47500 / 3125 = $15.20 per unit

Now take, Labor Efficiency variance = (Standard hours for actual production - Actual hours) Std. Rate = - $ 950

= ( 47500 / Std. Rate - 5100) Std. Rate = - 950

on solving for Std. Rate, we get - Std. Rate / Labor hour = $9.13 per labor hour

So, Standard hours for Actual Production = $47500 / $9.13 = 5202 hours for actual production

Now, we calculate the Standard hours per unit = Standard labor cost per unit / Std. Rate per hour

= $ 15.20 / $9.13 = 1.66 hours

a. the standard direct labor rate per hour = $9.13 per labor hour

b. the standard hours allowed for the month’s production = 5202 hours

c. the standard hours allowed per unit of product = 1.66 hours per unit

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