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 or Hours 3 feet ? hours Cost $ 15 or Rate Direct materials Direct labor $5 per foot ? per hour During March, the company purchased direct materials at a cost of $45,210, all of which were used in the production of 2,500 units of product. In addition, 4,100 direct labor-hours were worked on the product during the month. The cost of this labor time was $30,750 The following variances have been computed for the month Materials quantity variance Labor spending variance Labor efficiency variance $ 3,600 U $ 2,750 U $700 U Required: 1. For direct materials: a. Compute the actual cost per foot of materials for March b. Compute the price variance and the spending variance 2. For direct labor a. Compute the standard direct labor rate per hour b. Compute the standard hours allowed for the month's production C. Compute the standard hours allowed per unit of product. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 For direct materials, compute the actual cost per foot of materials for March. (Round your answer to 2 decimal places.) Actual cost per foot

Explanation / Answer

1. material quantity variance = 3600 U

(standard quantity - actual quantity) standard rate = (3600)

(3 - AQ)*2500 Units * 5 = (3600)

(7500 - 2500 AQ) *5 = (3600)

7500 - 2500 AQ = (720)

8220 = 2500 AQ

AQ = 3.288 Feet

a) actual cost per feet = total cost / total feet

= 45210 / (3.288*2500)

= $ 5.5

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

= (5 - 5.5) 8220

= 4110 U

2. labour spending variance = (standard rate - actual rate) actual hours

2750 U = ( SR - (30750 /4100) *4100

(2750) = (SR - 7.5) *4100

SR = $ 6.83

Labour efficiency varince = (standard hrs - actual hrs) standard rate

700 U = (SH - 4100) 6.83

(700) = 6.83 SH - 28000

27300 = 6.83 SH

SH = 4000 HOURS

C) standard hours allowed per unit of product = total hours / total units

= 4000 hours / 2500 units

= 1.6 hours

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