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 $52,305, all of which were used in the production of 3,000 units of product. In addition, 4,600 hours of direct labor time were worked on the product during the month. The cost of this labor time was $43,700. The following variances have been computed for the month:

Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.)

             

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))

             

For direct labor: (Do not round intermediate calculations.)

Compute the standard direct labor rate per hour. (Round your final answer to 2 decimal places.)

             

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.)

          

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

Explanation / Answer

Answer:

1. a. Materials quantity variance = SP (AQ – SQ) $5.00 per foot (AQ – 9000 feet*) = $2550 U $5.00 per foot × AQ – $45000 = $2550** $5.00 per foot × AQ = $47,550 AQ = 9510 feet *3000 units × 3.00 feet per unit **When we use the formula, unfavorable variances are positive and favorable variances are negative. Therefore,Actual Cost (AP) = $52,305 ÷ 9510 feet = $5.5 per foot. b.   Materials price variance = AQ (AP – SP) 9510 feet ($5.50 per foot – $5.00 per foot) = $4755 U The total spending variance for materials would be: Materials price variance……………………………… $4,755 U Materials quantity variance…………………………. 2550 U Total variance……………………………………………. $7,305 U 2.   a.   Labor rate variance = AH (AR – SR) 4600 hours ($9.5 per hour* – SR) = $4100 F** $43,700 -4600 hours × SR = -$4,100*** 4600 hours × SR = $47,800 SR = $10.39 per hour Thus, Standard labour rate per hour = $10.39 * $43700 ÷ 4600 hours ** Total labor variance $3,200 U Labor efficiency variance $900 U Labor rate variance $4,100 F *** When used with the formula, unfavorable variances are positive and favorable variances are negative. b.   Labor efficiency variance = SR (AH – SH) $10.39 per hour (4600 hours – SH) = $900 U $47,794 – $10.39 per hour × SH = $900* $10.39 per hour × SH = $46,894 SH = 4513.38 hours = 4514 hours *When used with the formula, unfavorable variances are positive and favorable variances are negative. c. The standard hours allowed per unit of product would be: 4514 hours ÷ 3000 units = 1.50 hours per unit

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