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Homework answers / question archive / Company manufactures a product for which the following standards have been set Direct materials Direct Labor Standard Quantity or Hours 3 feet 2 hours Standard Price or Rate $5 per foot 2
Company manufactures a product for which the following standards have been set Direct materials Direct Labor Standard Quantity or Hours 3 feet 2 hours Standard Price or Rate $5 per foot 2. per hour Standard Cost $ 15 During March, the company purchased direct materials at a cost of $56,610, all of which were used in the production of 2,875 units of product. In addition, 4700 direct labor-hours were worked on the product during the month. The cost of this labor time was $37,600. The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance $ 4,050 U $ 2,180 U $ 770 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.
1.
a)Material quantity variance = ( Standard quantity - Actual quantity ) x Standard rate or ((2,875*3) - AQ) x 5 =(4,050)
Therefore Actual quantity = 9,435 feet
Total cost of direct materials = $ 56,610
Therefore Actual cost per foot = 56,610 / 9,435 = $ 6.00
b) Direct material price variance = ( Standard Price - Actual price) x Actual quantity = (5-6.00) x 9,435 = $ 9,435 U
Direct material spending variance = ( 2,875 x 15 - 56,610 ) = $ 13,485 U
2. Labor spending variance = 2,180 U
Labor efficiency variance = 770 U
Labor rate variance = 2,180 U - 770 U = 1,410 U
Labor rate variance = ( Standard labor hour rate - Actual labor hour rate) x Actual hours worked or
(X - 8) x 4,700 = (4,700)
Standard labor hour rate is $ 7
b) Standard hours allowed for the months production :
Labor efficiency variance = ( Std. hrs. allowed for actual prod. - Actual hours worked) x Std. hourly rate
or ( X - 4,700) x 7= (770)
Standard hours allowed for actual production is $ 4,590
c) Standard hours allowed per unit of product = 4,590 / 2,875 = 1.6 hours
Standard direct labor rate per hour = 32,130 /4,700 = $ 6.84
