ACC 206 Week 4 Chapter 7 Problem 5 Straightforward variance analysis

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Chapter 7 Problem 5Straightforward variance analysis 

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 

 

 

The following information pertains to activity for December:

  1. 1.      Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations.
  2. 2.      Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity.
  3. 3.      Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year.
  4. 4.      Actual production amounted to 6,500 completed units.

 

Instructions: 

  1. a.       Compute Arrow’s direct material variances.
  2. b.      Compute Arrow’s direct labor variances.
  3. c.       Compute Arrow’s variances for factory overhead.
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    ACC 206 Week 4 Chapter 7 Problem 5 Straightforward variance analysis
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