Question

[The following information applies to the questions displayed below.] Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $5.10 per Ib.) Direct labor (8 hrs. @ $15 per hr.) Factory overhead-variable (8 hrs. @ $6 per hr.) Factory overhead-fixed (8 hrs. @ $9 per hr.) Total standard cost $153.00 120.00 48.00 72.00 $393.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 65,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 80% 45,500 52,000 364,000 416,000 90% 58,500 468,000 Production in units Standard direct labor hours Budgeted overhead Fixed factory overhead Variable factory overhead $3,744,000 $3,744,000 $3,744,000 $2,184,000 $2,496,000 $2,808,000

Answer 1

Solution :

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
1741000	$7.00	$12,187,000.00			1741000	$5.10	$8,879,100.00			1755000	$5.10	$8,950,500.00
			$3,307,900.00	U				$71,400.00	F
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$3,307,900.00	U
Direct material quantity variance					$71,400.00	F
Direct material cost variance					$3,236,500.00	U

Controllable Variance
Actual overhead	$6,420,000.00
Budgeted overhead	$6,552,000.00
Controllable variance	$132,000.00	F

Fixed overhead volume variance
Budgeted fixed overhead	$3,744,000.00
Fixed overhead cost applied	$4,212,000.00
Fixed overhead volume variance	$468,000.00	F