Question

Sharp Company manufactures a product for which the following standards have been set: Standard Quantity Standard Price Standard or Hours or Rate Cost 3 feet $5 per foot $ 15 ? hours ? per hour Direct materials Direct labor During March, the company purchased direct materials at a cost of $57,510, all of which were used in the production of 3,125 units of product. In addition, 5.100 direct labor-hours were worked on the product during the month. The cost of this labor time was $51,000. The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance $ 1,050 U $ 3,500 U $ 950 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

1) Material quantity variance = (Standard qty-actual qty)Standard price

-1050 = (3125*3*5-5X)

5X = 46875+1050

X(Actual qty) = 9585

Actual cost per foot = 57510/9585 = 6 per foot

1b) Material price variance = (5-6)*9585 = 9585 U

Material spending variance = (3125*15-57510) = 10635 U

2a) Labor rate variance = (Standard rate-actual rate)Standard rate

-2550 = (X*5100-51000)

-5100X = -48450

X(Standard rate) = 9.50

2b) Labor efficiency variance = (Standard hour-actual Hour)Standard rate

-950 = (X*9.50-5100*9.50)

-9.50X = -47500

Standard hour = 5000 Hour

2c) Standard hour per unit = 5000/3125 = 1.6 hour per unit