# ARC Company produces_standard costing_Variance analysis

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## Description

ARC Company produces several
products in its factory, including a karate robe. The company uses a standard
cost system to assist in the control of costs. According to the standards that
have been set for the robes, the factory should work 780 direct labor-hours
each month and produce 3,900 robes. The standard costs associated with this
level of production are as follows:

Total Per Unit of

Product

Direct materials
…………………… \$73,710
\$18.90

Direct labor
………………………… \$13,260
3.40

(based on

direct labor-hours)
………………. \$2,340
0.60

\$22.90

During April, the factory worked
only 750 direct labor-hours and produced 4,000 robes. The following actual
costs were recorded during the month:

Total Per Unit of

Product

Direct materials (12,400 yards)
…………… \$74,400 \$18.60

Direct labor
……………………………………. \$14,400
3.60

………. \$8,000 2.00

\$24.20

At standard, each robe should
require 3.0 yards of material. All of the materials purchased during the month
were used in production. Overhead applied based on direct labor hours. For
standards and actuals, you are given total costs and the per unit cost. For
standards and actuals, youâ€™ll need to (2) convert the total cost of DM to a
cost per yard, (2) convert the total cost of DL to a cost per direct labor hour
and (3) covert the total cost of variable overhead to a cost per direct labor
hour.

Required:

For Direct
Materials–

1.
What
is the actual quantity of input at the actual price?

2.
What
is the actual quantity of input at the standard price?

3.
What
is the standard quantity of input allowed for the actual output?

4.
What
is the standard quantity of input allowed for the actual output at the standard
price?

5.
What
is the flexible budget?

6.
What
is the DM price variance?

7.
What
is the DM quantity variance?

8.
Check Figure–What is the total variance associated
with DM? \$1,200F.

For Direct
Labor–

9.
What
is the actual quantity of input at the actual price?

10.
What
is the actual quantity of input at the standard price?

11.
What
is the standard quantity of input allowed for the actual output?

12.
What
is the standard quantity of input allowed for the actual output at the standard
price?

13.
What
is the flexible budget?

14.
What
is the DL price variance?

15.
What
is the DL quantity variance?

16.
Check Figure–What is the total variance associated
with DL? \$800U.

For Variable

17.
What
is the actual quantity of input at the actual price?

18.
What
is the actual quantity of input at the standard price?

19.
What
is the standard quantity of input allowed for the actual output?

20.
What
is the standard quantity of input allowed for the actual output at the standard
price?

21.
What
is the flexible budget?

22.
What
is the Variable OH price variance?

23.
What
is the Variable OH quantity variance?

24.
Check Figure–What is the total variance associated
with Variable OH? \$5,600 U.

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