[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.) | $ | 153.00 |
Direct labor (4 hrs. @ $15 per hr.) | 60.00 | |
Factory overhead—variable (4 hrs. @ $6 per hr.) | 24.00 | |
Factory overhead—fixed (4 hrs. @ $11 per hr.) | 44.00 | |
Total standard cost | $ | 281.00 |
The predetermined overhead rate is based on a planned operating
volume of 80% of the productive capacity of 68,000 units per
quarter. The following flexible budget information is
available.
Operating Levels | ||||||
70% | 80% | 90% | ||||
Production in units | 47,600 | 54,400 | 61,200 | |||
Standard direct labor hours | 190,400 | 217,600 | 244,800 | |||
Budgeted overhead | ||||||
Fixed factory overhead | $ | 2,393,600 | $ | 2,393,600 | $ | 2,393,600 |
Variable factory overhead | $ | 1,142,400 | $ | 1,305,600 | $ | 1,468,800 |
During the current quarter, the company operated at 90% of capacity
and produced 61,200 units of product; actual direct labor totaled
239,800 hours. Units produced were assigned the following standard
costs.
Direct materials (1,836,000 Ibs. @ $5.10 per Ib.) | $ | 9,363,600 |
Direct labor (244,800 hrs. @ $15 per hr.) | 3,672,000 | |
Factory overhead (244,800 hrs. @ $17 per hr.) | 4,161,600 | |
Total standard cost | $ | 17,197,200 |
Actual costs incurred during the current quarter follow.
Direct materials (1,826,000 Ibs. @ $6.70 per lb.) | $ | 12,234,200 |
Direct labor (239,800 hrs. @ $12.00 per hr.) | 2,877,600 | |
Fixed factory overhead costs | 1,942,800 | |
Variable factory overhead costs | 1,818,800 | |
Total actual costs | $ | 18,873,400 |
(a) Compute the variable overhead spending and
efficiency variances. (Round "cost per unit" and "rate per
hour" answers to 2 decimal places.)
AH = Actual Hours
SH = Standard Hours
AVR = Actual Variable Rate
SVR = Standard Variable Rate
Solution:
a. ) Computer the variable overhead spending and efficiency variance:
Actual Variable Overhead Cost | Flexible Budget | Standard Cost (VOH applied) | ||||||||
AH | × | AVR | AH | × | SVR | SH | × | SVR | ||
239,800 | × | $7.58 | 239,800 | × | $6 | 244,800 | × | $6 | ||
$1,818,800 | $1,438,800 | $1,468,800 | ||||||||
$380,000 | $30,000 | |||||||||
Variable overhead spending variance | $380,000 | U | ||||||||
Variable overhead efficiency variance | $30,000 | F | ||||||||
Total variable overhead variance | $350,000 | U |
* AVR =$1,818,800 (variable factory overhead costs) /239,800hrs.
SH =$1,468,800/$6
=244,800 hrs.
b.) Computer the fixed overhead spending and volume variance:
Actual Fixed OH Cost | Budgeted Overhead | Standard Cost (FOH applied) | ||||||||
AH | × | AFR | 244,800 | × | $11 | |||||
239,800 | × | $8.10 | $2,692,800 | |||||||
$1,942,800 | $2,393,600 | |||||||||
$450,800 | $299,200 | |||||||||
Fixed Overhead spending variance | $450,800 | F | ||||||||
Fixed overhead volume variance | $299,200 | F | ||||||||
Total fixed overhead costs variance | $750,000 | F |
* AFR =$1,942,800(fixed factory overhead costs)/239,800 hrs.
c.) Computer the total overhead controllable variance:
Overhead controllable variance
Variable overhead spending variance | $380,000 | U |
Variable overhead efficiency variance | $30,000 | F |
Fixed overhead spending variance | $450,800 | F |
Total overhead controllable variance | $100,800 | F |
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