Question

Required information Use the following information for the Problems below. The following information applies to the questions displayed below.] Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. $5. 10 per Ib.) Direct labor (4 hrs. @$15 per hr.) Factory overhead-variable (4 hrs $6 per hr.) Factory overhead- fixed (4 hrs. Q $11 per hr. ) 153, 00 60, 00 24. 00 44, 00 281. 00 Total standard cost The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 68,000 units per quarter. The following flexible budget information is available. Operating Levels 70 % 80 % 90% Production in units 47, 600 54, 400 61,200 Standard direct labor hours 190, 400 217, 600 244, 800 Budgeted overhead Fixed factory overhead Variable factory overhead 2, 393, 600 $1,142, 400 2,393, 600 $1,305, 600 2, 393, 600 $1, 468, 800 During the current quarter, the company operated at 90% of capacity and produced 61,200 units of product, actual direct labor totaled 239,800 hours. Units produced were assigned the following standard costs. C Direct materials (1,836, 000 Ibs. $5. 10 per Ib. ) Direct labor (244, 800 hrs. $15 per hr. ) Factory overhead (244, 800 hrs. $17 per hr. ) 9, 363, 600 3, 672, 000 4, 161, 600 $17, 197, 200 Total standard cost Actual costs incurred during the current quarter follow. Direct materials (1,826, 000 Ibs. $6. 70 per lb. ) Direct labor (239, 800 hrs. @ $12.00 per hr. ) Fixed factory overhead costs Variable factory overhead costs $12, 234, 200 2, 877, 600 1,942, 800 1,818, 800 Total actual costs $18, 873, 400 Required: 1. Compute the direct materials cost variance, including its price and quantity variances. Actual Cost Standard Cost Standard Standard price Actual price Actual Standard quantity Actual quantity quantity 1,826,000 price 1,826,000 6.70 5.10 S 12,234,200 9,312,600 S 0 2,921,600 S Direct materials price variance Unfavorable 2,921,600 Direct materials quantity variance 0 Favorable Total direct materials variance Unfavorable 2. Compute the direct labor cost variance, including its rate and efficiency variances. Actual Cost Standard Cost Standard Actual Actual Standard Standard rate Actual hours rate hours rate hours 0 S 0 S Direct materials price variance S 0 Favorable Direct materials quantity variance 0 Favorable Total direct materials variance Favorable 3. 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

Solution 1:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
1826000	$6.70	$12,234,200.00			1826000	$5.10	$9,312,600.00			1836000	$5.10	$9,363,600.00
			$2,921,600.00	U				$51,000.00	F
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$2,921,600.00	U
Direct material quantity variance					$51,000.00	F
Direct material cost variance					$2,870,600.00	U

Solution 2:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
239800	$12.00	$2,877,600.00			239800	$15.00	$3,597,000.00			244800	$15.00	$3,672,000.00
			$719,400.00	F				$75,000.00	F
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$719,400.00	F
Direct Labor Efficiency variance					$75,000.00	F
Direct labor cost variance					$794,400.00	F

Solution 3:

Controllable Variance
Actual overhead	$3,761,600.00
Budgeted overhead	$3,862,400.00
Controllable variance	$100,800.00	F

Fixed overhead volume variance
Budgeted fixed overhead	$2,393,600.00
Fixed overhead cost applied	$2,692,800.00
Fixed overhead volume variance	$299,200.00	F