Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4.80 per Ib.) Direct labor (8 hrs. @ $16 per hr.) Factory overhead-variable (8 hrs. @ $9 per hr.) Factory overhead-fixed (8 hrs. @ $12 per hr.) Total standard cost $144.00 128.00 72.00 96.00 $440.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 59.000 units per quarter. The following flexible budget information is available. 80% Operating Levels 70% 90% 41,300 47,200 53,100 330,400 377,600 424,800 Production in units Standard direct labor hours Budgeted overhead Fixed factory overhead Variable factory overhead $4,531,200 $4,531,200 $4,531,200 $2,973,600 $3,398,400 $3,823,200 During the current quarter, the company operated at 90% of capacity and produced 53,100 units of product; actual direct labor totaled 420,800 hours. Units produced were assigned the following standard costs. $ 7.646.400 Direct materials (1,593,000 lbs. @ $4.80 per Ib.) Direct labor (424,800 hrs. @ $16 per hr.) Factory overhead (424,800 hrs. @ $21 per hr.) Total standard cost 6,796,800 8,920,800 $23,364,000

Answer 1

Solution 1:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
1582000	$5.90	$9,333,800.00			1582000	$4.80	$7,593,600.00			1593000	$4.80	$7,646,400.00
			$1,740,200.00	U				$52,800.00	F
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$1,740,200.00	U
Direct material quantity variance					$52,800.00	F
Direct material cost variance					$1,687,400.00	U

Solution 2:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
420800	$12.50	$5,260,000.00			420800	$16.00	$6,732,800.00			424800	$16.00	$6,796,800.00
			$1,472,800.00	F				$64,000.00	F
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$1,472,800.00	F
Direct Labor Efficiency variance					$64,000.00	F
Direct labor cost variance					$1,536,800.00	F

Solution 3:

Controllable Variance
Actual overhead	$8,320,800.00
Budgeted overhead	$8,354,400.00
Controllable variance	$33,600.00	F

Fixed overhead volume variance
Budgeted fixed overhead	$4,531,200.00
Fixed overhead cost applied	$5,097,600.00
Fixed overhead volume variance	$566,400.00	F