Question

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

Direct materials (29 Ibs. @ $3 per Ib.)	$	87.00
Direct labor (6 hrs. @ $6 per hr.)		36.00
Factory overhead—variable (6 hrs. @ $4 per hr.)		24.00
Factory overhead—fixed (6 hrs. @ $5 per hr.)		30.00
Total standard cost	$	177.00

The predetermined overhead rate is based on a planned operating volume of 70% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available.

	Operating Levels
		60%		70%		80%
Production in units		36,000		42,000		48,000
Standard direct labor hours		216,000		252,000		288,000
Budgeted overhead
Fixed factory overhead	$	1,260,000	$	1,260,000	$	1,260,000
Variable factory overhead	$	864,000	$	1,008,000	$	1,152,000

During the current quarter, the company operated at 80% of capacity and produced 48,000 units of product; actual direct labor totaled 285,000 hours. Units produced were assigned the following standard costs:

Direct materials (1,392,000 Ibs. @ $3 per Ib.)	$	4,176,000
Direct labor (288,000 hrs. @ $6 per hr.)		1,728,000
Factory overhead (288,000 hrs. @ $9 per hr.)		2,592,000
Total standard cost	$	8,496,000

Actual costs incurred during the current quarter follow:

Direct materials (1,387,000 Ibs. @ $3.10 per lb.)	$	4,299,700
Direct labor (285,000 hrs. @ $5.75 per hr.)		1,638,750
Fixed factory overhead costs		2,527,358
Variable factory overhead costs		2,366,038
Total actual costs	$	10,831,846

	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

Controllable Variance   

Actual overhead [$2,527,358+ $2,366,038]	$ 4,893,396.00
Budgeted overhead [from flexible budget, 80% capacity] (1,260,000+,1,152,000)	$ 2,412,000.00
Controllable Variance	$ 2,481,396.00	Unfavorable

Fixed Overhead Volume Variance:   

Budgeted fixed overhead [given, at 80% capacity]	$ 1,260,000.00
Fixed overhead cost applied [288,000 hrs. @ $5]	$ 1,440,000.00
Fixed overhead volume variance	$      180,000.00	Favorable