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 Cost $15 or Rate Direct materials Direct labor or Hours 3 feet ? hours $5 per foof ? per hour During March, the company purchased direct materials at a cost of $56,610, all of which were used in the production of 2,875 units of product. In addition, 4,700 hours of direct labor time were worked on the product during the month. The cost of this labor time was $37,600. The following variances have been computed for the month Materials quantity variance Labor spending variance Labor efficiency variance $4,050 U $2,180 U $770 U Required 1. For direct materials a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.) tual 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))

Explanation / Answer

Material qunatity variance (AQ used - standard qty allowed)* standard rate (AQ        - 2,875*3)*5 = 4,050 AQ                                 = (4050+43125)/5 9435 1a) Actual cost 6 per foot (56610/9435) 1b) price variance 9,435 U spending variance 13,485 U price variance = (6-5)*9435U = 9435 Speding variance = 9435 + 4050=13,485 U 2a) Standard direct labor rate per hr labor price variance = 2,180 U -770U = 1410 U labor price variance = ( AR - SR)*AH 1410 = (8 - x)*4700 x            = (37600-1410)/4700 7.7 Standard direct labor rate per hr 7.7 2b) Standard hours allowed labor efficiency variance (AH - SH)*SR = 770 (4700 - SH)*7.7 = 770 SH                       = (36,190-770)/7.7 4600 standared hours allowed 4,600 2c) Standard hours 1.6 hours per unit (4600/2875)

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