Arrow Enterprises uses a standard costing system. The standard cost sheet for pr

Question

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 a) Direct Material Variance = ($6.50 – 6.40) *26350 = $2635 b) Direct labor variances = ($8.75 -$8.50) * 51400 = $12850 c) Arrow's variances for factory overhead = $508400 - (56 +20) * 6500 = $14400

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