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Question

Sharp company manufactures a product for which the following standards have been set:

Required:

For direct materials, compute the actual cost per foot of materials for March. (Round your answer to 2 decimal places.)

1.a

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

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.)

Answer “Sharp company manufactures a product for which the following standards have been set:”

1)

Materials quantity variance = (Actual quantity-Standard quantity) x Standard price

4,500 = [Actual quantity – (3,200 x 3)] x $5

Actual 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) x Actual quantity

Material price variance = ($5.3 – $5) x 10,500

Material price variance = $3,150 Unfavorable

Material Spending variance = (Actual price x Actual Quantity) – (Standard Price x Standard Quantity)

Material Spending variance = ($5.3 x 10,500) – ($5 x 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 x Actual hours) – (Standard rate x Actual hours)

$2,450 = Actual labor cost – (Standard rate x 4,900)

Standard rate x 4,900 = $36,750 – $2,450

Standard rate x 4,900 = $34,300

Standard rate = $34,300/4,900

Standard direct labor rate = $7 per hour

Labor efficiency variance = (Actual hours – Standard hours) x Standard rate

$700 = (4,900 – Standard hours) x $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 unit of product = 4,800/3,200

Standard hours allowed per unit of product = 1.5 hours

Last words

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