Sharp Company manufactures a product for which the following

Sharp Company manufactures a product for which the following standards have been set: Standard Cost $15 Standard Quantity Standard Price or Rate or Hours 3feet hours $5 per foot Direct materials Direct labor ? per hour During March, the company purchased direct materials at a cost of $55,850, all of which were used in the production of 3,210 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 $36,950. The following variances have been computed for the month Materials quantity variance Labor spending variance Labor efficiency variance $4,350 U $1,570 F 680U Required 1. For direct materials a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.) Actual cost per foot

Solution

1. For direct Materials

a

Materials quantity variance

SP(AQ - SQ)

4350 = $5 per foot (AQ -9630)

870 = AQ - 9630

AQ =10500 per foot

Actual cost = $55850/10500

Actual cost =$5.32 per foot

b

Compute the price variance and spending variance

Material price variance: AQ (AP-SP)

10500($5.32 per foot - $5 per foot)

10500* $0.32 per foot

$3360 U

Total variance of materials

Material price variance

$3,360

Material quantity variance

$4,350

Total spending variance

$7,710

Price variance

$3,360

U

Spending variace

$7,710

U

2. For direct labor

a

Labor rate variance : AH (SR - AR)

$2250 = 4900 hrs [($36950/4900) - SR]

$2250 = 4900 hrs [7.54- SR]

SR = $7.99

b

Labor efficiency variance : SR (AH - SH)

$680 u = 7.99 (4900 -SH)

SH = 4985 hours

c

Compute the standard hours allowed per unit

4985 hours/3210 units

1.55 hours per unit

	1. For direct Materials
a	Materials quantity variance
	SP(AQ - SQ)
	4350 = $5 per foot (AQ -9630)
	870 = AQ - 9630
	AQ =10500 per foot
	Actual cost = $55850/10500
	Actual cost =$5.32 per foot
b	Compute the price variance and spending variance
	Material price variance: AQ (AP-SP)
	10500($5.32 per foot - $5 per foot)
	10500* $0.32 per foot
	$3360 U
	Total variance of materials
	Material price variance	$3,360
	Material quantity variance	$4,350
	Total spending variance	$7,710
	Price variance	$3,360	U
	Spending variace	$7,710	U