Chapter 7 Problem 5 5. P26-B3 Straightforward variance analysis (L.O. 5) Arrow E

Question

Chapter 7 Problem 5 5. P26-B3 Straightforward variance analysis (L.O. 5) Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows. Direct materials: 4 units @ $6.50 $26.00 Direct labor: 8 hours @ $8.50 68 Variable factory overhead: 8 hours @ $7.00 56 Fixed factory overhead: 8 hours @ 2.5 20 Total standard cost per unit $170.00 The following information pertains to activity for December: 1. Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations. 2. Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity. 3. Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year. 4. Actual production amounted to 6,500 completed units. Instructions: a. Compute Arrow's direct material variances. b. Compute Arrow's direct labor variances. c. Compute Arrow's variances for factory overhead.

Explanation / Answer

Hi, If you like my answer rate me lifesaver first...that way only I can earn points. Thanks 1) Direct Materials Variance = ($6.40 - $6.50) * 26350 = -$2635 2) Direct Labor Variance = ($7 - $8.75) * 51400 = -$89950 3) Variance for factory overhead = $(56 + 20) *6500 - $508400 = -$14400

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