Question

Sharp Company manufactures a product for which the following standards have been set:

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

During March, the company purchased direct materials at a cost of $55,650, all of which were used in the production of 3,200 units of product. In addition, 4,900 direct labor-hours were worked on the product during the month. The cost of this labor time was $36,750. The following variances have been computed for the month:

Materials quantity variance	$	4,500	U
Labor spending variance	$	3,150	U
Labor efficiency variance	$	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.

For direct materials, compute the actual cost per foot of materials for March. (Round your answer to 2 decimal places.)

1.A

	Actual cost per foot

For direct materials, 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). Input all amounts as positive values.)

1.B

	Price variance Spending variance

2a. For direct labor, compute the standard direct labor rate per hour. (Round your answer to the nearest whole dollar.)

2b. For direct labor, compute the standard hours allowed for the month’s production. (Do not round your intermediate value.)

2c. For direct labor, compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

	2a. Standard direct labor rate per hour 2b. Standard hours allowed for the month’s production 2c. Standard hours allowed per unit of product

Answer 1

1) Materials quantity variance (Actual quantity-Standard quantity)*Standard price 4,500 [Actual quantity-(3,200*3)]*$5 Actual quantity -9,600 $4,500/$5 Actual quantity - 9,600 900 Actual quantity = 9,600+900 Actual quantity 10,500 feet Actual cost per foot $55,650/10,500 Actual cost per foot $5.3 per foot Material price variance (Actual price-Standard price) Actual quantity Material price variance ($5.3-$5)*10,500 Material price variance $3,150 Unfavorable Material Spending variance (Actual price Actual Quantity) (Standard Price*Standard Quantity) Material spending variance ($5.3*10,500)- ($5*9,600) Material spending variance $55,650-$48,000 Material spending variance $7,650 Unfavorable

2) Labor rate variance Labor spending variance - Labor efficiency variance Labor rate variance $3,150- $700 Labor rate variance $2,450 Unfavorable Labor rate variance (Actual rate*Actual hours) (Standard rate*Actual hours) $2,450 Actual labor cost -(Standard rate*4,900) Standard rate*4,900 $36,750-$2,450 Standard rate*4,900 $34,300 Standard rate $34,300/4,900 Standard direct labor rate $7 per hour Labor efficiency variance (Actual hours - Standard hours)*Standard rate $700 (4,900-Standard hours)*$7 4,900-Standard hours $700/$7 4,900-Standard hours 100 Standard hours =4,900-100 Standard hours allowed for the month's production 4,800 hours Standard hours allowed per unit of product 4,800/3,200 Standard hours allowed per unit of product =1.5 hours