Question

Sharp Company manufactures a product for which the following standards have been set: Direct materials Direct labor Standard Quantity Standard Price Standard or Hours or Rate Cont 3 feet $5 per foot $ 15 ? hours ? per hour 2 During March, the company purchased direct materials at a cost of $53.730, all of which were used in the production of 2,875 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 $37,600. The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance $1,650 U $ 3,100 U $ 750 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.

Answer 1

ANSWER=

REQUIREMENT- (1A)

Computation of Actual Material Cost per Feet for March were as follows:-

Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price

MQV= (AQ - SQ for Actual Production) x SP

$1650 = (AQ - 2875 x 3) x $5

1650 = 5AQ - 43125

AQ = 8955 Feet

Therefore:-

Actual Cost per Feet = $53730 / 8955

Thus, Actual Cost per Feet = $6.00 Per Feet

REQUIREMENT-(1B)

i)- Material Price Variance   = (Actual Price - Standard Price) x Actual Quantity

   = ($6 -$5) x 8955

Material Price Variance   = $8955(Unfavourable)

ii)- Material Spending Variance = (Actual Price x Actual Quantity) - (Standard Price x Standard Quantity)

= ($6.00 x 8955) - ($5 x 8625)

= $53730 - $43125

Material Spending Variance     = $10605 (Unfavourable)

REQUIREMENT-(2)

(2a) -

Labour Rate Variance = Labour Splending Variance - Labour Efficiency Variance

= $3100 - $750

= $2350(Unfavourable)

Labour rate Variance = (Actual rate x Actual Hours) - (Standard rate x Actual hours)

$2350    = Actual Labour cost - (Standard rate x 4700)

= Standard rate x 4700 = $37600 - $2350

= $35250 / 4700

Standard Rate Direct Labour rate = $7.5 Per Hour.

2(b)

Labour Efficiency Variance = (Actual Hours - Standard Hours) x Standard Rate

$750 (U) = (4700 - Standard Hours) x $7.5

Standard Hours = 4600 Hours

Thus,

Standard Hours allowed for the month's Production= 4600 Hours.

2(c):-

Standard Hour allowed per unit of product = 4600 Hours / 2875

= 1.6 Hours-(Answer)