Sharp Company manufactures a product for which the following

Sharp Company manufactures a product for which the following standards have been set: Standard Cost Standard Price or Rate $5 per foot ? per hour Standard Quantity Direct materials Direct labor or Hours 3feet Phours During March, the company purchased direct materials at a cost of $59,450, all of which were used in the production of 3,390 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 $40,550. The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance $1,650 U $ 130 F $1,480 F Required: 1. For direct materials: a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.) cost per foot

Solution

Solution: 1). For Direct materials a. Actual cost $5.66 per foot Working Notes: material Quantity Variance=(SQ -AQ) x Sp in this formula + favorable and -is unfavorable -1,650 =((3,390 x 3) - AQ) x 5 or, -AQ = -1650/5   -3,390 x 3 -AQ=-330-10,170 AQ=10,500 feet there fore actual cost per foot = Actual cost / Actual quantity =59,450 / 10,500 =$ 5.6619 per foot =$5.66 per foot b. Price Variance $6,950 U Spending Variance $8,600 U Working Notes: Price Variance = (SP -AP) x AQ in this formula + favorable and -is unfavorable =(5-5.66190476) x 10,500 =-$6,949.999999 =$6,950 U Spending Variance= Std. Cost - actual cost in this formula + favorable and -is unfavorable =Sp x SQ - Actual cost = (5 x 3 x 3,390) - 59,450 =50,850 - 59,450 = -8,600 =8,600 U price + Quantity = cost Variances -6,950-1,650=-8,600 -8,600=-8,600 hence our above calculation is correct 2). For Direct Labor a. Standard direct labor per hour is $8 Working Notes: Labor efficiency variance= (Std Hrs -Actual Hrs) x SR in this formula + favorable and -is unfavorable 1,480 F =( Std Hrs - 4,900 ) x SR 1,480 =(Std Hrs x SR - 4,900xSR) Std Hrs x SR used from below notes or 1,480 =( 40,680 - 4,900x SR) SR=(40,680 -1,480 )/4,900 =$8 per hrs Notes: Labor spending Variance=( SR x Std. Hrs - AR x Ahrs) 130 F=(SR x Std. -40,550) therefore SR x Std. =130 + 40,550=$40,680 AR x Ahrs = Actual lab. Cost= $40,550 given b. Standard hours allowed for the month production= 5,085 Hrs Working Notes: SR x Std. Hrs =8 x Std. Hrs (from a ) Std. Hrs = 40,680/8 =5,085 hrs C. standard hours allowed per unit of product 1.50 hrs Working Notes: Shrs per unit of product = Std Hrs /actual units produced. =5085/3,390 =1.5 hrs per unit of products Please feel free to ask if anything about above solution in comment section of the question.