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 $57,650, all of which were used in the production of 3,300 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 $38,750. The following variances have been computed for the month:

Required:

1. For direct materials:

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

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)).

2. For direct labor:

a. Compute the standard direct labor rate per hour. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. Compute the standard hours allowed for the month’s production.

c. Compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

Standard Quantity
or Hours Standard Price
or Rate Standard
Cost Direct materials 3 feet $ 5 per foot $ 15 Direct labor ? hours ? per hour ?

Explanation / Answer

Req 1: For Direct Material Actual Output : 3300units Standard Qty required per unit of output = 3 feet Standard Qty Required for actual Output (SQ) =( 3300*3)= 9900 feet Std Price per feet (SP) = $ 5 per foot Actual material cost = $ 57650 Actual Quantity consumed for actual output = AQ Actual Price per foot = AP Material Quantity Variance = $ 3,000 U Material Quantity Variance = SP (SQ-AQ) $ 3,000 U = 5 (9900 -AQ) AQ = 10,500 feet Actual Quantity Consumed for actual Quantity (AQ) = 10,500 feet Actual Price per foot (AP) = (57,650/10,500) = $ 5.49 per foot Material Price variance = AQ (SP-AP) ( 10,500 ( $ 5.00 - $ 5.49) = $ 5,150 Unfavorable Material Spending Variance= SQ*SP-AQ*AP (9900 *5 - 10500*5.49)= $8,150 Unfavorable Actual cost per foot $ 5.49 per feet Price Variance $5,150 Unfav Spending variance $8,150 Unfav Req 2: For Direct Labour Actual Output = 3300 units Actual hours worked for actual output (AH) = 4,900 hours Actual labour cost = $ 38,750 Actual labour rate per hour (AR) =(38,750/4900) = $ 7.91 per hour Labour Spending variance = $ 850 Fav Labour Efficiency Variance = $ 400 fav Labour Spending Variance = Labour rate variance + Labour Efficeincy Variance $850 fav = Labour rate variance + $400 fav Labour Rate variance = $ 450 fav Labour Rate variance = AH (SR-AR) $450 fav = 4,900 (SR - $ 7.91) Standard rate per hour (SR) = $ 8 per hour Labour Efficiency Variance = SR (SH-AH) $ 400 fav = $ 8.00 ( SH - 4,900 hours) Standard hours for actual month production (SH) = 4,950 hours Standard Hours for actual production =4950hours Actual production = 3300 units Standard hour required per unit of output =(4950/3300) = 1.5 hours per unit Standard rate per hour $ 8.00 per hour Std hours for actual output 4950 hours Std hour per unit of output 1.5 hours per unit

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