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 $ 11 per foot $ 33 Direct labor ? hours ? per hour ? During March, the company purchased direct materials at a cost of $111,300, 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 $95,550. The following variances have been computed for the month: Materials quantity variance $ 4,400 U Labor spending variance $ 450 F Labor efficiency variance $ 2,000 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:

Direct labor cost = $51450

Direct labor hours 4677.27

Direct labor per hour 1.46

Explanation:

Sharp Company

Given Data

Standard Quantity or Hours Standard Price or Rate Standard Cost

Direct materials 3 feet $ 11 per foot $ 33

Direct labor ? hours ? per hour ?

Materials quantity variance $ 4,400 U

Labor spending variance $ 450 F

Labor efficiency variance $ 2,000 U

1.a.  The Actual Cost per foot of materials for March=$111,300/10000=$ 11.13

Materials quantity variance $ 4,400 U =(Standard Price * Actual Quantity)-(Standard Price * Standard Quantity)

$ 4,400 U = 11* AQ- 11*3 feet*3200

$ 4400= 11* AQ- 105600

$ 4400+ $105600=  11* AQ

AQ =110000/11= 10,000

b. Materials price variance = Actual Price *Actual Quantity - Standard Price * Actual Quantity

Materials price variance =Actual Price *Actual Quantity - Standard Price * Actual Quantity  

Materials price variance =$ 11.13* 10000- 11*10000

Materials price variance=$111,300-110000=1300 Unfavorable

Spending variance= Purchase Price Variance + Materials quantity variance

Spending variance= 1300 Unfavorable + $ 4,400 U= 5700 Unfavorable

2.  Labor spending variance $ 450 F =Labor efficiency variance $ 2,000 U+Direct Labor rate per hour

a. Direct Labor rate per hour =Labor efficiency variance + Labor spending variance =$ 2,000 +$ 450 =$ 2450 Unfav

Direct Labor rate per hour =(actual hours* actual rate)- (actual hours * standard rate)

Direct labor time variance= (actual hours* standard rate)- (standard hours * standard rate)

$ 2450 Unfav= 4900*11- standard hours * 11

standard hours *11= 53900- 2450= 51450

b. Standard Hours= 51450/11= 4677.27

c. Standard Hours per unit of product=  4677.27/3200= 1.46

Actual Hours= 4900/3200= 1.53125