Question

Trico Company set the following standard unit costs for its single product.

Direct materials (30 Ibs. @ $4.80 per Ib.)	$	144.00
Direct labor (7 hrs. @ $14 per hr.)		98.00
Factory overhead—variable (7 hrs. @ $6 per hr.)		42.00
Factory overhead—fixed (7 hrs. @ $9 per hr.)		63.00
Total standard cost	$	347.00

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 64,000 units per quarter. The following flexible budget information is available.

	Operating Levels
		70%		80%		90%
Production in units		44,800		51,200		57,600
Standard direct labor hours		313,600		358,400		403,200
Budgeted overhead
Fixed factory overhead	$	3,225,600	$	3,225,600	$	3,225,600
Variable factory overhead	$	1,881,600	$	2,150,400	$	2,419,200

During the current quarter, the company operated at 90% of capacity and produced 57,600 units of product; actual direct labor totaled 400,200 hours. Units produced were assigned the following standard costs.

Direct materials (1,728,000 Ibs. @ $4.80 per Ib.)	$	8,294,400
Direct labor (403,200 hrs. @ $14 per hr.)		5,644,800
Factory overhead (403,200 hrs. @ $15 per hr.)		6,048,000
Total standard cost	$	19,987,200

Actual costs incurred during the current quarter follow.

Direct materials (1,715,000 Ibs. @ $6.30 per lb.)	$	10,804,500
Direct labor (400,200 hrs. @ $11.00 per hr.)		4,402,200
Fixed factory overhead costs		2,813,800
Variable factory overhead costs		2,634,200
Total actual costs	$	20,654,700

Required:
1. Compute the direct materials cost variance, including its price and quantity variances.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

	Actual Cost 0 0 Standard Cost AQ x AP AQ x SP SQ x SP x x x $0 0 $0 $0 Unfavorable 0 Favorable Unfavorable

2. Compute the direct labor cost variance, including its rate and efficiency variances.

3. Compute the overhead controllable and volume variances.

	Controllable Variance Actual overhead Budgeted overhead Controllable variance

	Fixed overhead volume variance Budgeted fixed overhead Fixed overhead cost applied Fixed overhead volume variance

Answer 1

Solution Direct Materials es quantity varlances Actual cost AQ XAP AQX sp Standard Cost SQ X SP 1728000 x 4,80 8294400 1715 000 X 480 1715000X 6,30 10804500 8232000 2972500 V (Price variance) 62400F (Quantity variance) 3851100 W

Direct Labor rate of efficiency variances Standard cost Actual cost AHY AR AHY SR SHX SR 400200 X 11.00 400200X14:00 403200 X 14.00 5644 800 4402200 560 2800 1200600 F (Rate variance) 42000 F (efficiency variance) .. 1249600 F ( Total Labor varlance) overhead variances : controllable varlance 5448000 Actual overhead ( 2813800 + 2634200] Applied overhead [from Herr ble budget, 90°%. Capacity] -5644800 controllable variance 196800 F fixed overhead volume variance : 3225600 Budgeted fixed overhead [given at 90% capacity] fered overhead cost applied [ 403200 by @9] .. 3628800 fixed overhead volume varlance 403200 F