Answer:
1a) Actual Cost per foot = 6$
1b) Materials Price variance = 7530
1b) Spending Variance = 10830
2a) Standard Rate = 7.5 USD
2b) Standard Hours = 4804 hours
2c) Standard hours allowed = 2.09
Explanation:
As usual, let's sort out the data given:
1. For direct materials:
a) Compute the actual cost per foot of materials for March.
For actual cost per foot for materials for march. We need to find the actual quantity first. so, we will come back to it.
Data Given:
Units Produced = 2,290
Standard Quantity for Direct material = 3 feet
Standard Quantity for Direct materials = 3 x 2,290 = 6870 feet
Standard Price per foot = 5 USD
Standard Total Units = 6870
Total Price = 5 x 6870 = 34350 USD
But
Actual Price = unknown
Actual Quantity = Unknown
Actual Cost = 45,180$ company purchased the direct materials at that cost.
Material Quality Variance = Standard Price x (Actual Qty - Standard Qty)
Here in this equation, we know all the quantities except Actual Qty. let's make it subject to calculate it.
Actual Qty = 3,300/$5 + 6870
Actual Qty = 7,530
Now, as we have Actual Quantity, we can calculate the part a of part 1.
So, let's calculate a.
a) a) Compute the actual cost per foot of materials for March.
Actual cost per foot = Direct Material Cost / Actual Qty
Actual Cost per foot = 45,180/7530
Actual Cost per foot = 6$
Let's move on to part 1 b.
b) Compute the price variance and the spending variance.
Formula to calculate the Materials Price Variance is as follows:
Materials Price Variance = Actual Qty x( Actual Price - Standard Price)
Materials Price Variance = 7530 x ( 6 - 5)
Materials Price variance = 7530
Now, we have to calculate the spending variance and the formula is as follows:
Spending Variance = (Actual Price x Actual Qty) - (Standard Qty x Standard Price)
Spending Variance = (6 x 7530) - ( 6870 x 5)
Spending Variance = 10830
Let's move on to part 2 a.
a) Compute the standard direct labor rate per hour:
Formula :
Labor rate variance = (Standard Rate - Actual Rate) x Actual Hours
Labor rate variance = Labor spending variance - Labor efficiency variance
Labor rate variance = 3130 - 780 = 2350
In this equation, we know all the quantities but we have to find Standard rate so make it subject.
Standard Rate = 2350/4700 + 7
Standard Rate = 7.5 USD
b. Compute the standard hours allowed for the month’s production.
Labor Efficiency Variance = Standard rate x ( Actual hours - Standard Hours)
In this part, we need to find the standard hours.
let's make it the subject.
Standard hours = 780/7.5 + 4700
Standard Hours = 4804 hours
c. Compute the standard hours allowed per unit of product.
Standard hours allowed can be found by plugging in the values in the following formula.
Formula:
Standard hours allowed = Standard hours / units produced
Standard hours allowed = 4804/2,290
Standard hours allowed = 2.09
