Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 lbs.@ $4 per lb.) Direct labor (5hrs.@$14 per hr) Factory overhead-variable (5 hrs.@$8 per hr.) Factory overhead-fixed (5 hrs.@$10 per hr.) Total standard cost $120 70 40 50 $280 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% 80% 90% Production in units Standard direct labor hours Budgeted overhead 42,000 210,000 48,000 240,000 54,000 270,000 Fixed factory overhead Variable factory overhead $2.400.000 $2.400,000 $2.400,000 1,680,000 $1,920,000 $2,160,000 During the current quarter, the company operated at 90% of capacity and produced 54,000 units of product; actual direct labor totaled 265,000 hours. Units produced were assigned the following standard costs Direct labor (270,000 hrs. @$14 per hr) Factory overhead (270,000 hrs.@$18 per hr) Total standard cost 3,780,000 4,860,000 $15,120,000 Actual costs incurred during the current quarter follow Direct labor (265,000 hrs. $13.75 per hr) Fixed factory overhead costs Variable factory overhead costs Total actual costs 3,643,750 2,350,000 2,200,000 $14,815,250

Answer 1

Part 1 Direct Material Variances: Cost Total Actual units at actual cost Standard units at standard cost Direct material cost variance Units 1,615,000 4.10 6,621,500 1,620,000 4.00 6,480,000 141,500 Cost Total Actual quantity at actual price Actual quantity at standard price Price variance 4.10 6,621,500 1,615,000 4.00 6,460,000 161,500 Actual quantity at standard price Standard quantity at standard price Quantity variance ,615,0004 1,620,000 .00 6,460,000 4.00 6,480,000 20,000 Price variance Quantity variance Total materials variance 161,500 U 141,500 U Part 2 Direct Labor Variances: Price Total 3,643,750 Actual units at actual cost Standard units at standard cost Variance 265,000 13.7S 270,000 14.00 3,780,000 136,250 F Total Actual hours at actual rate Actual hours at standard rate Rate variance 265,000 13.75 3,643,750 265,000 14.00 3,710,000 66,250 F Actual hours at standard rate Standard hours at standard rate Efficiency variance 265,000 14.00 3,710,000 270,000 14.00 3,780,000 70,000 F Rate variance Efficiency variance Total labor variance 66,250 F 70,000 136,250

Part 3: Overhead variances: Controllable variance Actual overhead ($2,350,000+$2,200,000) Applied overhead (90% capacity) ($2,400,000 + $2.160.000) Controllable variance 4,550,000 10,000 Fixed overhead volume variance: Budgeted fixed overhead (70% capacity) Fixed overhead cost applied (270,000x $10) Fixed overhead volume variance 2,400,000 2,700,000 300,000