Question

Required information Use the following information for the Problems below. [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. @ $4.40 per Ib.) Direct labor (6 hrs. @ $14 per hr.) Factory overhead-variable (6 hrs. @ $8 per hr.) Factory overhead-fixed (6 hrs. @ $12 per hr.) Total standard cost $132.00 84.00 48.00 72.00 $336.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 69,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 80% 48,300 55,200 289,800 331,200 90% 62,100 372,600 Production in units Standard direct labor hours Budgeted overhead Fixed factory overhead Variable factory overhead $3,974,400 $3,974,400 $3,974,400 $ 2,318,400 $2,649,600 $2,980, 800 During the current quarter, the company operated at 90% of capacity and produced 62,100 units of product; actual direct labor totaled 291,000 hours. Units produced were assigned the following standard costs. s Direct materials (1,863,000 Ibs. @ $4.40 per Ib.) Direct labor (372,600 hrs. @ $14 per hr.) Factory overhead (372,600 hrs. @ $20 per hr.) Total standard cost 8.197,200 5, 216,400 7,452,000 $ 20,865,600 Actual costs incurred during the current quarter follow. Direct materials (1, 466,000 Ibs. @ $7.40 per lb.) Direct labor (291,000 hrs. @ $12.60 per hr.) Fixed factory overhead costs Variable factory overhead costs Total actual costs $10,848, 400 3,666,600 3,014,600 3,272,200 $ 20,801, 800

Answer 1

1. Direct Material Cost Variance

Actual Quantity = 1,466,000

Standard Quantity = 1,863,000

Actual Price = $ 7.4

Standard Price = $ 4.4

Material Price Variance =Actual Quantity x Actual Price - Actual Quantity x Standard Price

Material Price Variance = (1466000 * 7.4) - (1466000 * 4.4)

= 10,848,400-6,450,400

=4,398,000(Adverse)

Material Quantity Variance = Actual Quantiy x Standard Price - Standard Quantity x Standard Price

= (1466000 * 4.4) -( 1863000 * 4.4)

=6,450,400 - 8,197,200

= (1,746,800) (Favourable)

Material Cost Variance = Material Price Variance + Material Quantity Variance

= 4,398,000 (A) + (1,746,800) (F)

= 2,651,200 (A)

2. Direct Labour Cost Variance

Standard Direct Labor Hour = 372600

Actual Direct Labor Hour = 291000

Standard Rate/Hour = $ 14/Hr

Actual Rate/Hour = $12.6/Hr

Labor Rate Variance = Actual Labor Hours * Actual Rate - Actual Labor Hours * Standard Rate

= (291000 * 12.6) - (291000 * 14)

= 3,666,600 - 4,074,000

= -407,400 (Favourable)

Labor Efficiency Variance = Actual Hours x Standard Rate - Standard Hours x Standard Rate

= 291000* 14 - 372600* 14

= 4,074,000- 5,216,400

= -1,142,400 (Favourable)

Direct Labor Variance = Labor Rate Variance + Labor Efficiency Variance

= (- 407,400) (f) + (-1,142,400) (f)

= -1,549,800 (Favourable)

3. Overhead Controllable Variance = Actual Factory Overhead-Budgeted Factory overhead

Actual Factory Overhead = 3014600 +3272200 = $ 6,286,800

Budgeted Allowance Based on standard Hours Allowed = $ 7452000

Overhead Controllable variance=6,286,800-7452000

= −1,165,200 Favorable

Overhead Volume Variance = Actual Fixed Cost Absorbed - Budgeted Fixed Cost

= 3014600- 3974400

= - $959,800(Favourable)

5 Direct Material Cost Variance X AQ 1,466,000 SP $4.40 SQ 1863000 Standard cost X I | 8.197,200 SP $4.40 | 10 4.398,000(Adverse) 6,450,400 (1,746,800) (Favourable) Actual cost AQ X AP 9 1,466,000 $7.40 10,848,400 11 12 Direct material price variance 13 Direct material quantity variance 14 Direct material cost variance 15 4398000 1746800 2651200 Adverse Favorable Adverse 16 18 Direct labor Cost Variance 20 Actual cost AH X SR AR $12.60 AH 291000 Standard cost TSR x $14 5216400 291000 X SH | 372600 1,142,400 (Favourable) $14 3666600 407,400(Favourable 4074000 Direct labor rate variance Direct labor efficiency variance Direct labor cost variance 407,400 1142400 1549800 Favorable Favorable Favorable Controllable variance Actual overhead $6.286.800 32 Budgeted overhead $7,452,000 33 Controllable variance 1,165,200 Favorable Fixed Overhead volume variance Budgeted Fixed Overhead 3974400 Fixed overhead cost applied 3014600 Fixed overhead volume variance $959.800 Favorable