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: Standard Quantity Standard Price Standard Direct materials Direct labor or Hours 3 feet ? hours or Rate $5 per foot ? per hour Cost s 15 During March, the company purchased direct materials at a cost of $57,090, all of which were used in the production of 3,400 units of product. In addition, 5,200 direct labor-hours were worked on the product during the month. The cost of this labor time was $54,600 The following variances have been computed for the month Materials quantity variance Labor spending variance Labor efficiency variance $900 U 3,600 U 1,000 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.

Explanation / Answer

Materials Quantity variance (AQ used - Std Qty allowed)*SR (x - 3400*3)*5 =900U 5x - 51000 = 900U x =(900+51000)/5 10380 a) actual cost = 57,090/10380 5.5 per foot answer ( b) Materials price variance (Actual rate - standard rate)*AQ purchased (5.5 - 5)*10,380 5190 U answer Spending variance = 900U+5190 6090 U answer 2a) labor spending varian 3,600 U labor efficiency varian 1,000 U labor price variance 2600 U labor rate variance = ( Actual rate - standard rate)*Actual hours (54,600- x)*5200 = 2,600 x = (54600-2600)/5200 10 Standard hours 10 per hour b) Standard hours = labor efficiency variance (Actual hours - standard hours allowed)*Standard rate (5200 -x ) *10 = 1,000 52,000 - 10x = 1000 x                       = (52000-1000)/10 5100 Standard hours allowed 5,100 hours c) Standard hours allowed per unit of product 5100/3400 1.5 Standard hours allowed per unit of product 1.5 hours per unit

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