Sharp Company manufactures a product for which the following standards have been set Standard Quantity Standard Price Standard or Hours or Rate 3 feet Cost $15 7 hours Direct materials Direct labor $5 per foot 7 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 c product. In addition, 4,900 direct labor-hours 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 Labor spending variance Labor efficiency variance $4,500 U $3,150 0 $ 700 U 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,
Sharp Company manufactures a product for which the following standards have been set Standard Quantity Standard Price Standard or Hours or Rate 3 feet Cost $15 7 hours Direct materials Direct labor $5 per foot 7 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 c product. In addition, 4,900 direct labor-hours 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 Labor spending variance Labor efficiency variance $4,500 U $3,150 0 $ 700 U 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,
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:Sharp Company manufactures a product for which the following standards have been set
Standard Quantity
or Hours
3 feet
2 hours
Standard Price Standard
or Rate
Cost
$5 per foot $15
7 per hour
7
Direct materials
Direct labor
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 direct labor-hours 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
Labor spending variance
Labor efficiency variance
$ 4,500 U
$3,150 U
$ 700 U
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.
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