Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4.80 per Ib.) Direct labor (7 hrs. @ $14 per hr.) Factory overhead-Variable (7 hrs. @ $6 per hr.) Factory overhead-Fixed (7 hrs. @ $9 per hr.) Total standard cost $144.00 98.00 42.00 63.00 $347.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 67,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 80% 90% 46,900 53,600 60,300 328,300 375, 200 422,100 Production in units Standard direct labor hours Budgeted overhead Fixed factory overhead Variable factory overhead $3,376,800 $3,376,800 $3,376,800 $1,969,800 $2,251,200 $2,532,600 During the current quarter, the company operated at 90% of capacity and produced 60,300 units of product; actual direct labor totaled 399,200 hours. Units produced were assigned the following standard costs. Direct materials (1,809,000 Ibs. @ $4.80 per Ib.) Direct labor (422,100 hrs. @ $14 per hr.) Factory overhead (422,100 hrs. @ $15 per hr.) Total standard cost $ 8,683,200 5,909,400 6,331,500 $ 20,924,100 Actual costs incurred during the current quarter follow. Direct materials (1,711,000 Ibs. @ $6.30 per lb.) Direct labor (399,200 hrs. @ $11.20 per hr.) Fixed factory overhead costs Variable factory overhead costs Total actual costs $10,779,300 4,471,040 2,813,700 3,084,100 $21,148,140

Answer 1

Req -1	Actual Cost				Flexible Budget				Standard Cost
	Actual Hours	x	Actual Variable Rate		Actual Hours	x	Standard Variable Rate		Standard Hours	x	Standard Variable Rate
	399,200	x	$                         7.73		399,200	x	$                     6.00		422,100	x	$                         6.00
		$          3,084,100				$    2,395,200				$      2,532,600
				$         688,900				$    137,400
	Variable overhead spending Variance				$      688,900	Unfavourable
	Variable OH efficiency  Variance				$      137,400	Favorable
	Total Voh variance				$      551,500	Unfavourable
	Explanation:
	Variable overhead spending Variance   = (Standard Price - Actual Price )* Actual Quantity Purchased
	(6 - 7.73) * 399200
	$                                                                  688,900	Unfavourable
	Variable OH efficiency  Variance = (Standard quantity - Actual   Quantity )*Standard Price
	(422100 - 399200) * 6
	$                                                                  137,400	Favourable
	Total VOH variance = Standard   material cost - actual material cost
	(2532600-3084100)
	$                                                                  551,500	Unfavourable
Req -2	Actual Fixed OH Cost				Budgted Overhead				Standard Cost(FOH   Applied)
	Actual Hours	x	Actual Fixed rate						Standard Hours	x	Standard Fixed rate
	399,200	x	$                         7.05						422,100	x	$                         9.00
		$          2,813,700				$    3,376,800				$      3,798,900
				$         563,100				$    422,100
	Fixed overhead spending variance	(Budgdted Overhead - Actual Fixed   Overhead)			$      563,100	Favorable
	Fixed overhead Volume variance	(Standard Fixed Applied - Budgdted   Fixed Overhead)			$      422,100	Favorable
	Total Fixed OH cost variance	(Standard Fixed Applied - Actual   Fixed Overhead)			$      985,200	Favorable
Req -3	Overhead Controllable   Variance
	Variable   overhead spending variance	$          688,900	Unfavourable
	Variable   overhead efficiency variance	$          137,400	Favorable
	Fixed overhead   spending variance	$          563,100	Favorable
	Total overhead   controllable variance	$            11,600	Favorable