Sharp Company manufactures a product for which the following standards have been set:Standard Quantity Standard Price Standardor Hours or Rate CostDirect materials .............. 3 feet $5 per foot $15Direct labor .................... ? hours ? per hour ?During March, the company purchased direct materials at a cost of $55,650, all of which were usedin the production of 3,200 units of product. In addition, 4,900 hours of direct labor time were worked onthe product during the month. The cost of this labor time was $36,750. The following variances have beencomputed for the month:Direct materials quantity variance .......... $4,500 UTotal direct labor variance ...................... $1,650 FDirect labor efficiency variance ................ $800 URequired:1. For direct materials:a. Compute the actual cost per foot for materials for March.b. Compute the materials price variance and a total variance for materials.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.(Hint: In completing the problem, it may be helpful to move from known to unknown data either by usingthe columnar format shown in Exhibits 9–4 and 9–6 or by using the variance formulas.)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Sharp Company manufactures a product for which the following standards have been set:
Standard Quantity Standard Price Standard
or Hours or Rate 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:
Direct materials quantity variance .......... $4,500 U
Total direct labor variance ...................... $1,650 F
Direct labor efficiency variance ................ $800 U
Required:
1. For direct materials:
a. Compute the actual cost per foot for materials for March.
b. Compute the materials price variance and a total variance for materials.
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.
(Hint: In completing the problem, it may be helpful to move from known to unknown data either by using
the columnar format shown in Exhibits 9–4 and 9–6 or by using the variance formulas.)
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