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 3feet $5 per foot $15
Direct labor ? hours ? per hour ?

During March, the company purchased direct materials at a cost of $59,040, all of which were used in the production of 3,000 units of product. In addition, 4,600 hours of direct labor time were worked on the product during the month. The cost of this labor time was $34,500. The following variances have been computed for the month:

Materials quantity variance $4,200 U
Labor spending variance $3,900 U
Labor efficiency variance $680 U

Required:
1. For direct materials:
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:
a. Compute the standard direct labor rate per hour. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. Compute the standard hours allowed for the month’s production.
c. Compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)

Answer 1

Answer:

Sharp Company

1a. Actual price per foot of material = $59,040 divided by 9,280 feet

= $6.36 per Foot

1b. Material Price Variance = $12,640

2a. Actual Direct labor rate per hour = $7.50

And standard direct labor rate per hour = $6.65

2b. Standard hours Per unit = 4,497.78/ 3000 units

= $1.50

Explanation:

Material quantity variance = standard Price x (standard quantity - Actual quantity)

= $15 x (9,000 - ?) = -$4,200

? = Actual Quantity (feet) = 9,280

Actual price per foot of material = $59,040 divided by 9,280 feet

= $6.36 per Foot

B. Material price variance = (standard price - Actual price) x Actual Quantity

= ($5 - $6.36) x 9,280 feet

= $12,640

2a. Actual labor pay divided by labour hours worked = Actual labour rate per hour.

= $34,500/4,600

= $7.50 per hour

2b. Labour Spending Variance = Actual Rate x Actual Hours - Actual Hours x Standard rate

= ($7.50 x 4,600) - (4,600 x ?) = $3,900

? = Standard rate = $6.65 per hour

bii. Labor Efficiency variance = Actual hours x standard rate - standard hours x standard rate

= (4,600 x $6.65) - (? x $6.65)

? = standard hours = 4,497.78

Standard hours Per unit = 4,497.78/ 3000 units

= $1.50