Sharp Company manufactures a product for which the following standards have been
ID: 2567610 • Letter: S
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 $45,240, all of which were used in the production of 2,400 units of product. In addition, 4,900 hours of direct labor time were worked on the product during the month. The cost of this labor time was $39,200. 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))
Compute the standard direct labor rate per hour. (Do not round intermediate calculations. 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
1.a.Material quantity variance = (Standard quantity – Actual quantity) x Standard price
- $ 3,000 = (7,200 - Actual quantity) x $ 5
- $ 3,000/$ 5 = (7,200 - Actual quantity)
Actual quantity = 7,200 + 600 = 7,800 foot
Actual cost for actual total quantity (7,800 ft.) = $ 45,240
Actual cost for foot = $ 45,240/7,800 = $ 5.8
b.
Material price variance = (Standard price – Actual price) x Actual quantity
= ($ 5 - $ 5.8) x 7,800
= - $ 0.8 x 7,800 = - $ 6240 U
Material spending variance = (Standard price - Actual price) x Quantity purchased
= ($ 5 - $ 5.8) x 7,800
= - $ 0.8 x 7,800 = - $ 6240 U
As all the quantity purchased is used in production, Material price variance and Material spending variance are same.
2.a
Actual rate = $ 39,200/4,900 = $ 8
Labor spending variance = (Standard rate – Actual rate) x Actual hours
-$ 3,200 = (Standard rate - $ 8) x 4,900
(Standard rate - $ 8) = - $ 3,200/4,900
(Standard rate - $ 8) = - $ 0.653061
Standard rate = $ 8 - $ 0.653061 = $ 7.346939 or $ 7.35
b.
Labor efficiency variance = (Standard hours – Actual hours) x standard rate
-$ 750 = (Standard hours – 4,900) x $ 7.35
(Standard hours – 4,900) = - $ 750 /$ 7.35
Standard hours = 4,900 - 102.0408 = 4,797.959 or 4,798
c.
Standard hours for actual production (2,400 units) = 4,798
Standard hours per unit = 4,798/2,400 = 1.99915 or 2 hours.
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