ACC?O, 100-Bonus Qinz Nane Or 02 03 04 Os Data for unit of product. the next3 qu

Question

ACC?O, 100-Bonus Qinz Nane Or 02 03 04 Os Data for unit of product. the next3 questions: Anow Industries employs a standard cost system in which direct materials y is carried at standard cost. Arrow has established th e following standards for the prime costs of one Standard Standard Standard Quantin 8 pounds $1:80 per pound $14.40 0.25 hour $8.00 per hour S 2.00 Price Cost Direct materials Direct labor uring May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142.500 pounds of direct material and 5,000 direct labor hours. 1. Compute direct material price variance for May. Also, indicate whether it is Favorable (F) or Unfavorable 2. Compute direct material quantity variance for May. Also, indicate whether it is Favorable (F) or Unfavorable (U) 3. Compute direct labor rate variance for May. Also, indicate whether it is Favorable (F) or Unfavorable (U) 4. Compute direct labor efficiency variance for May. Also, indicate whether it is Favorable (F) or Unfavorable (U).

Explanation / Answer

1) (AP-SP)*AQP
     =($1.9 -$1.8) *160000
     = $O.1 * 160,000
     =$16000 U
Here,
AP = Actual price
SP = Standard price
AQP = Actual quantity purchased
Actual price = 304,000/160,000 = $1.9

2) (AQU - SQA)* SP
    =(142,500 -( 19000*8)*$1.8
    =9500* 1.8
    =17,100 F
Here,
AQU = Actual quantity used
SQA = Standard quantity applied
SP = Standard price

3) (AR -SR) * AH
     (37,800 - (8 * 5000)
= 37,800 - 40,000
=2200 F
Here,
AR = Actual rate
SR= Standard rate
AH = Actual hour

4) (AH- SH)* SR
(5000 -(19000 * 0.25)*8
= (5000 - 4750) *8
= 2000 U
Here,
AH = Actual hour
SH= Standard hour
SR = Standard rate

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