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 (6 hrs. @ $14 per hr.) 84.00 Factory overhead—variable (6 hrs. @ $7 per hr.) 42.00 Factory overhead—fixed (6 hrs. @ $9 per hr.) 54.00 Total standard cost $ 324.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 57,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 80% 90% Production in units 39,900 45,600 51,300 Standard direct labor hours 239,400 273,600 307,800 Budgeted overhead Fixed factory overhead $ 2,462,400 $ 2,462,400 $ 2,462,400 Variable factory overhead $ 1,675,800 $ 1,915,200 $ 2,154,600 During the current quarter, the company operated at 90% of capacity and produced 51,300 units of product; actual direct labor totaled 304,800 hours. Units produced were assigned the following standard costs. Direct materials (1,539,000 Ibs. @ $4.80 per Ib.) $ 7,387,200 Direct labor (307,800 hrs. @ $14 per hr.) 4,309,200 Factory overhead (307,800 hrs. @ $16 per hr.) 4,924,800 Total standard cost $ 16,621,200 Actual costs incurred during the current quarter follow. Direct materials (1,519,000 Ibs. @ $7.30 per lb.) $ 11,088,700 Direct labor (304,800 hrs. @ $13.00 per hr.) 3,962,400 Fixed factory overhead costs 2,337,000 Variable factory overhead costs 2,187,800 Total actual costs $ 19,575,900 (a) Compute the variable overhead spending and efficiency variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.) AH = Actual Hours SH = Standard Hours AVR = Actual Variable Rate SVR = Standard Variable Rate (b) Compute the fixed overhead spending and volume variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.) AH = Actual Hours SH = Standard Hours AFR = Actual Fixed Rate SFR = Standard Fixed Rate (c) Compute the total overhead controllable variance.

Answer 1

a) Variable Overhead Spending Variance (AH x SVPR (304,800 x 7.00 (304,800 x 7.18 2,187,800 2,133,600 54,200 Unfavorable Variable Overhead efficiency Variance (AH x SVPR (304,800 x 7.00 (SH x SVR (307,800 x 7.00 2,133,600 2,154,600 21,000 Favorable Working Notes: Actual Variable Rate Per Hour Actual Variable overhead Actual Direct labor hours Actual Variable Rate Per Hour (2,187,800/304,800)$ 2,187,800 304,800 7.18 (rounded to two decimals b) Fixed Overhead Spending Variance Actual Fixed Overhead Budgeted Overhead 2,337,000 2,462,400 125,400 Favorable Fixed Overhead Volume Variance Budgeted Overhead (SH x SFR 2,462,400 2,462,400 307,800 x 9 2,770,200 307,800 Favorable

C) Overhead Controllable Variance Variable Overhead Spending Variance Variable Overhead Efficiency Variance Fixed Overhead Spending Variance Total Overhead Controllable Variance 54,200 Unfavorable 21,000 Favorable 125,400 Favorable 92,200 Favorable