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Sharp Company manufactures a product for which the following standards have been set:
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During March, the company purchased direct materials at a cost of $55,650, 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 $36,750. The following variances have been computed for the month:
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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.
For direct materials, compute the actual cost per foot of materials for March. (Round your answer to 2 decimal places.)
1.A
| Actual cost | per foot |
For direct materials, 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). Input all amounts as positive values.)
1.B
| Price variance |
| Spending variance |
2a. For direct labor, compute the standard direct labor rate per hour. (Round your answer to the nearest whole dollar.)
2b. For direct labor, compute the standard hours allowed for the month’s production. (Do not round your intermediate value.)
2c. For direct labor, compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.)
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The ratio of direct wages to factory costs is generally calculated based on past experience. Work is then calculated based on this ratio. Let’s say that the factory costs are Rs 30,000 and the direct wages in the factory are Rs 60,000. This would give 50 percent of direct wages to factory costs. The factory costs for next year will be 50% of direct wages. Direct Labor Cost (or Direct Labor Cost) is a part of a payroll bill that covers an expense related to the production of a product or the provision or delivery of a service. some. Direct labor cost=working time x salary
1.
Materials quantity variance =(Actual quantity-Standard quantity)*Standard price
4,500 =[Actual quantity-(3,200*3)]*$5
Actuai quantity- 9,600 = $4,500/$5
Actual quantity – 9,600 =900
Actual quantity =9,600 + 900
Actual quantity =10,500 feet
Actual cost per foot= $55,650/10,500
Actual cost per foot= $5.3 per foot.
Material price variance = (Actual price-Standard price)*Actual quantity
Material price variance = ($5.3-$5)*10,500.
Material price variance = $3,150 Unfavorable
Material Spending variance =( Actual price*Actual Quantity)- (Standard Price*Standard Quantity)
Material spending variance = ($5.3*10,500)-($5*9,600))
Material spending variance = $55,650-$48,000.
Material spending variance = $7,650 Unfavorable
2)
Labor rate variance = Labor spending variance – Labor efficiency variance
Labor rate variance = $3,150 – $700,
Labor rate variance =$2,450 Unfavorable
Labor rate variance = (Actual rate*Actual hours)- (Standard rate*Actual hours)
$2,450 =Actual labor cost -(Standard rate*4,900)
Standard rate*4,900 = $36,750-$2,450
Standard rate*4,900 = $34,300
Standard rate = $34,300/4,900
Standard direct labor rate = $7 per hour
Labor efficiency variance = (Actual hours – Standard hours)*Standard rate
$700 = (4,900-Standard hours)*$7
4,900-Standard hours = $700/$7
4.900-Standard hours =100
Standard hours =4,900 -100
Standard hours allowed for the month’s production =4,800 hours
Standard hours allowed per unít of product =4,800/3,200
Standard hours allowed per unit of product = 1.5 hours