Problem 10-11 Direct Materials and Direct Labor Variances; Computations from Incomplete Data [LO10-1, LO10-2] Sharp Company manufactures a product for which the following standards have been set: Standard Quantity or Hours 3 feet ? hours Standard Price or Rate $5 per foot ? per hour Standard Cost $15 Direct materials Direct labor During March, the company purchased direct materials at a cost of $57,090, all of which were used in the production of 3,400 units of product. In addition, 5,200 hours of direct labor time were worked on the product during the month. The cost of this labor time was $54,600. The following variances have been computed for the month: Materials quantity variance Labor spending variance Labor efficiency variance $ 900 U $3,600 U $1,000 U 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 b. Compute the price variance and the spending variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance)) Price variance Spending variance 2. For direct labor: a. Compute the standard direct labor rate per hour. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Standard direct labor rate per hour b. Compute the standard hours allowed for the month's production. Standard hours Standard hours [ hours irs C. Compute the standard hours allowed per unit of product. (Round your answer to 1 decimal place.) Standard hours hours per unit Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below: Sales (6,000 pools) Budgeted Actual $ 225,000 $225,000 Variable expenses: Variable cost of goods sold* Variable selling expenses 73,620 17,000 88,700 17,000 Total variable expenses 90,620 105,700 Contribution margin 134,380 119,300 Fixed expenses: Manufacturing overhead Selling and administrative 53,000 68,000 53,000 68,000 Total fixed expenses 121,000 121,000 Net operating income (loss) $ 13,380 $ (1,700) *Contains direct materials, direct labor, and variable manufacturing overhead. Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things under control." Upon reviewing the plant's income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool: Direct materials Direct labor Variable manufacturing overhead Standard Quantity or Hours 3.3 pounds 0.6 hours 0.5 hours* Standard Price or Rate $2.30 per pound $6.30 per hour $1.80 per hour Standard Cost $ 7.59 3.78 0.90 Total standard cost $ 12.27 *Based on machine-hours. During June the plant produced 6,000 pools and incurred the following costs: a. Purchased 24,800 pounds of materials at a cost of $2.75 per pound. b. Used 19,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 4,200 direct labor-hours at a cost of $6.00 per hour. d. Incurred variable manufacturing overhead cost totaling $7,260 for the month. A total of 3,300 machine- hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: 1. Compute the following variances for June: a. Materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Material price variance Material quantity variance b. Labor rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Labor rate variance Labor efficiency variance c. Variable overhead rate and efficiency variances. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance).) Variable overhead rate variance Variable overhead efficiency variance Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Summary of variances: Material price variance Material quantity variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance Net variance 3. Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) ? Materials price variance 7 Labor efficiency variance Variable overhead efficiency variance Labor rate variance Variable overhead rate variance Materials quantity variance