Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the direct costs of one unit of product:
Quantity Price Cost Direct materials 8 pounds $1.80 per pound
$14.40 Direct labor 0.25 hour $8.00 per hour
2.00_ $16.40 During May, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000.
The total factory wages for May were $42,000, 90 percent of which were for direct labor.
Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours.
a. Calculate the direct materials price variance for May.
b. Calculate the direct materials quantity variance for May.
c. Calculate the direct labor wage rate variance for May.
d. Calculate the direct labor efficiency variance for May.
Response is much more than the answer (as is typical with Brainmass!) -- a discussion of 233 words in everyday language guides you through "the pattern" across all the variances so you can learn it quickly and make fewer mistakes.
Part of your company's accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Hint: it is helpful to solve for the unknowns in the order indicated by the letters in the following table.)
Direct Material Direct Labor
Standard price or rate per unit of input $16 per pound e
Standard quantity per unit of output c f
Actual quantity used per unit of output a 3.5 hours
Actual price or rate per unit of input $14 per pound $21 per hour
Actual output 20,000 units 20,000 units
Direct material price variance $120,000 F ?
Direct material quantity variance b ?
Total of direct material variances $40,000 F ?
Direct labor rate variance ? d
Direct labor efficiency variance ? $200,000 F
Total of direct labor variances ? $130,000 F