Arnold Company produces a single product. Its standard cost card follows: Direct

ID: 2375969 • Letter: A

Question

Arnold Company produces a single product. Its standard cost card follows:

Direct Materials: 5 pounds at $10 per pound

Direct Labor : 3 hours at $12 per hour

Variable overhead: 3 hours at $20 per hour

The following additional information is available for the year just completed:

The company manufactured 8,000 units of product during the year

A total of 45,000 pounds of material was purchased and used at a total cost of $405,000

The company worked 25,000 direct labor hours during the year at a total cost of $275,000

Overhead is applied to products on the basis of direct labor hours. Total variable overhead was $525,000

Compute the following variances for the year.

a. Direct materials price:

b. Direct materials quantity:

c. Direct labor rate:

d. Direct labor efficiency:

e. Variable overhead spending:

f. Variable overhead efficiency:

Hi,

Please find the answers as follows:

Part A:

Direct materials price: = Actual Quantity*(Actual Rate - Standard Rate) = 45000*(405000/45000 - 10) = 45000 (F)

Part B:

Direct materials quantity= Standard Rate*(Actual Quantity - Standard Quantity) = 10*(45000 - 5*8000) = 50000 (F)

Part C:

Direct labor rate = Actual Hours*(Actual Rate - Standard Rate) = 25000*(275000/25000 - 12) = 25000 (F)

Part D:

Direct labor efficiency = Standard Rate*(Actual Hours - Standard Hours) = 12*(25000 - 3*8000) = 12000 (U)

Part E:

Variable overhead spending = Actual Hours*(Actual Rate - Standard Rate) = 25000*(525000/25000 - 20) = 25000 (U)

Part F:

Variable overhead efficiency = Standard Rate*(Actual Hours - Standard Hours) = 20*(25000 - 3*8000) = 20000 (U)

Thanks.

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