Acc206 Principles of Accounting: Week 4 Chapter 7 Problem 5 (P26-B3) Arrow Enterprises

Acc206 Principles of Accounting
Week 4 Assignment

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 68.00
Variable factory overhead: 8 hours @$7.00 56.00
Fixed factory overhead: 8 hours @2.5 20.00
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.
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