Problem: 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 prime costs of one unit of product.
Standard Standard Standard
Quantity Price Cost
Direct materials 8 pounds $1.80 per pound $14.40
Direct labor 0.25 hour $8.00 per hour $2.00
During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours.
1.The direct material price variance for May is:
- $16,000 favorable
- $16,000 unfavorable
- $14,250 favorable
- $14,250 unfavorable
2. The direct material quantity variance for May is:
- $14,400 unfavorable
- $1,100 favorable
- $17,100 unfavorable
- $17,100 favorable
3. The direct labor rate variance for May is:
- $2,200 favorable
- $1,900 unfavorable
- $2,000 unfavorable
- $2,090 favorable
4. The direct labor efficiency variance for May is:
- $2,200 favorable
- $2,000 favorable
- $2,000 unfavorable
- $1,800 unfavorable