Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 lbs. @ $4 per Ib.) Direct labor (5 hrs. @ $14 per hr.) Factory overhead-variable (5 hrs. @ $8 per hr.) Factory overhead-fixed (5 hrs. @ $10 per hr.) Total standard cost $120.00 70.00 40.00 50.00 $280.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available. Operating Levels 70% BOX 90% 42,000 48,000 54,000 210,000 240,000 270,000 Production in units Standard direct labor hours Budgeted overhead Fixed factory overhead Variable factory overhead $2,400,000 $2,400,000 $2,400,000 $1,680,000 $1,920,000 $2,160,000

Answer 1

Actual cost			1				-1	Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
1,615,000	x	$                            4.10		1,615,000	x	$                         4.00		1,620,000	x	$       4.00
	$6,621,500				$6,460,000.00				$6,480,000.00
			$161,500.00	0			$20,000.00
1
Direct material prce variance				$                 161,500	Unfavorable
Direct material quantity variance				$                    20,000	Favorable
Tota direct material varaince				$                 141,500	Unfavorable
Actual cost			-1				-1	Standard Cost
AH	x	AR		AQ	x	SP		SH	x	SR
265,000	x	$                         13.75		265,000	x	$                      14.00		270,000	x	$    14.00
	$3,643,750				$3,710,000.00				$3,780,000.00
			$66,250.00	2			$70,000
-1
Direct labor rate variance				$                    66,250	Favorable
Direct labor efficiency variance				$                    70,000	Favorable
Tota direct labor varaince				$                 136,250	Favorable
Compute the total overhead controllable variance.
Overhead Controllable Variance
Actual factory overhead	$                          4,550,000
Budgeted overhead	$                          4,560,000
controllable variance	$                                10,000	Favorable
Volume Variance
Budgeted fixed overhead	$                          2,400,000
Fixed overhead cost applied	$                          2,700,000	(270000*10)
fixed overhead volume variance	$                              300,000	Unfavourable