Question

Problem 10-11 Direct Materials and Direct Labor Variances; Computations from Incomplete Data [LO10-1, LO10-2] 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 $ 5 per foot $ 15 Direct labor ? hours ? per hour ? 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 hours of direct labor time 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: Materials quantity variance $ 4,500 U Labor spending variance $ 1,650 F Labor efficiency variance $ 800 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. b. Compute the standard hours allowed for the month’s production. c. Compute the standard hours allowed per unit of product

Answer 1

1)

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

4,500 = (Actual quantity-(3,200*3))*$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)*Actual quantity

Material price variance = ($5.3-$5)*10,500

Material price variance = $3,150 Unfavorable

Spending variance = ( Actual price*Actual Quantity) - (Standard Price*Standard Quantity)

Material spending variance = ($5.3*10,500)-($5*9600)

Material spending variance = $55,650 - $48,000

Material spending variance = $7,650 Unfavorable

2)

Labor spending variance = Labor efficiency variance + Labor rate variance

-$1,650 = $800 + labor rate variance

Labor rate variance = $1,650 -$800

Labor rate variance = $2,450 Favorable

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 = $39,200

Standard rate = $39,200/4,900

Standard rate = $8 per

Labor efficiency variance = (Actual hours - Standard hours)*Standard rate

$800 = (4,900-Standard hours)*$8

4,900-Standard hours = $800/$8

4,900-Standard hours = 100

Standard hours = 4,900 -100

Standard hours = 4,800 hours

Standard hours allowed per unit of product = 4,800/3,200

Standard hours allowed per unit of product = 1.5 hours