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 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.

Explanation / Answer

Materials Quantity variance (AQ used - Std Qty allowed)*SR (x - 3125*3)*5 =1050U 5x - 46,875 = 1050U x =(1050+46,875)/5 9585 a) actual cost = 57,510/9585 6 per foot answer ( b) Materials price variance (Actual rate - standard rate)*AQ purchased (6 - 5)*9585 9585 U answer Spending variance = 1050U+9585U 10635 U answer 2a) labor spending varian 3,500 U labor efficiency varian 950 U labor price variance 2550 U labor rate variance = ( Actual rate - standard rate)*Actual hours (51,000 - x*5,100) = 2550 x = (51000-2550)/5100 9.5 Standard rate 9.5 hours b) Standard hours = labor efficiency variance (Actual hours - standard hours allowed)*Standard rate (5100 -x ) *9.5 = 950 48,450 - 9.5x = 950 x                       = (48450-950)/9.5 5000 Standard hours allowed 5,000 hours c) Standard hours allowed per unit of product 5000/3125 1.6 Standard hours allowed per unit of product 1.6 hours per unit

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