ACC 206 Week 4 Problem 3 Straightforward variance analysis (Updated October 2013).

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Straightforward variance analysis

Andy Enterprises uses a standard costing system. The standard cost sheet for product no. 551 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 Andy’s direct material variances.

b. Compute Andy’s direct labor variances.

c. Compute Andy’s variances for factory overhead