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 Standan or Hours 3 feet ? hours Cost $15 or Rate $5 per foot Direct materials Direct labor ? per hour During March, the company purchased direct materials at a cost of $45,180, all of which were used in the production of 2,290 units of product. In addition, 4,700 direct labor-hours were worked on the product during the month. The cost of this labor time was $32,900 The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance 3,300U $ 3,130 u $ 780 U

Explanation / Answer

a) Calculate actual cost per foot :

Material quantity variance = (standard quantity-actual quantity)standard price

                       -3300       = (2290*3*5-X5)

                      5X             = 37650

X(actual quantity) = 37650/5 = 7530

Actual cost per foot = 45180/7530 = 6 per foot

1b) Material spending variance = Standard cost-actual cost

                                             = 2290*15-45180

Material spending variance = 10830 Unfavourable

1c) Material price variance = (standard price-actual price)actual quantity

                                       = (5-6)7530

Material price variance = 7530 Unfavourable

2a) Standard cost = Actual cost-Labour spending variance

                           = 32900-3130

Standard cost = 29770

Labour effiiency variance = (standrd quantity-actual quantity)standard rate

                        -780      = (29770-4700X)

                       4700X     = 30550

Standard direct labour rate per hour = 30550/4700 = 6.5 per hour

2b)Standard hours = 29770/6.5 = 4580 Hours

2c) standard hours = 4580/2290 = 2 hour per unit

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