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 $44,100, all of which were used in the production of 2,350 units of product. In addition, 4,800 hours of direct labor time were worked on the product during the month. The cost of this labor time was $40,800. The following variances have been computed for the month:

Materials quantity variance	$	1,500	U
Labor spending variance	$	3,200	U
Labor efficiency variance	$	800	U

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: (Do not round intermediate calculations.)

a.	Compute the standard direct labor rate per hour. (Round your final answer to 2 decimal places.)

             

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

            

Answer 1

Answer 2

Req 1-A	Actual cost	6.00	per foot	(Working Note: 1)
	Working Note 1:
	Material Qty Variance =   (Standard Quantity - Actual Quantity)*Standard price
	-1500=((2350*3)-   Actual Quantity)*5
	Actual Quantity =(1500 / 5) + 7050
	Actual Quantity =300 + 7050
	Actual Quantity =300 + 7050
	Actual Quantity =7350
	Actual cost per foot = actual cost / actual quantity
	Actual cost per foot = 44100 / 7350
	Actual cost per foot = 6 per foot
Req 1-B	Price variance	7,350	Unfav	(Working Note 2)
	Spending   variance	8,850	Unfav	(Working Note 2)
	Working Note 2:
	Material Price Variance =   (Standard Price - Actual Price )* Actual Quantity
	(5 - 6) * 7350
	7,350	Unfav
	Mat Spending variance =   Standard material cost - actual material cost
	(35250-44100)
	8,850	Unfav
	Working Note 3: Standard material cost
	Units actually produced	2,350
	Multiplied by standard quantity for 1 unit	3
	Total standard Quantity	7,050
	Multiplied by standard price per quantity	5
	Standard Material cost	35,250
Req 2
2a.	Standard direct   labor rate per hour	8.00	(Working   Note 4)
2b.	Standard   hours allowed for the month’s production	4,700	(Working   Note 5)
2c.	Standard   hours allowed per unit of product	2.00	(Working   Note 5)
	Working Note 4:
	Labor rate variance = Labor spending variance - Labor   efficience Variance
	(3200 - 800)
	2,400	Unfav
	Labor rate var =   (Standard rate * actual hrs) - (Actual rate* actual hrs)
	-2400 = (Standard rate   * 4800) - Actual labor cost
	Standard Rate *4800 = ( 40800 - 2400 )
	Standard Rate = (38400 / 4800 )
	Standard Rate = $8 per hour
	Working Note 5:
	Labor efficiency variance   = (Standard hour - actual hours) * Standard rate
	-800 = (Standard   hours  - 4800 )*8
	Standard Hours = (4800 - (800 / 8))
	Standard hours allowed for actual production = 4700 Hours
	Standard hours allowed   per unit of product = Total standard hr / actual units produced
	4700 / 2350
	2