Straightforward variance analysis
Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows.
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Direct materials: 4 units @ $6.50
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$26.00
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Direct labor: 8 hours @ $8.50
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68
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Variable factory overhead: 8 hours
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@ $7.00
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56
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Fixed factory overhead: 8 hours
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@ 2.5
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20
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Total standard cost per unit
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$170.00
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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.