*Trico Company set the following standard unit costs for its single product. Dir
ID: 2447155 • Letter: #
Question
*Trico Company set the following standard unit costs for its single product.
Direct Materials (30lbs @ $4 per lb.)…..$120.00
Direct Labor (5hrs @ $14 per hr)…..70.00
Factory Overhead – variable (5hrs @ $8 per hr)…..40.00
Factory Overhead – fixed (5 hrs @ $10 per hr)…..50.00
Total Standard Cost…..$280.00
*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.
……………………………………………….70%.....................80%.................90%
Production in units………………..42,000……………….48,000………….54,000
Standard direct labor hours…..210,000……………..240,000…………..270,000
Budgeted overhead
……Fixed factory overhead…..$2,400,000…..$2,400,000…$2,400,000
……Variable factory overhead..$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 Materials (1,620,000 lbs @ $4 per lb.)…..$6,480,000
Direct Labor (270,000 hrs @ $14 per hr)…..3,780,000
Factory overhead (270,000 hrs @ $18 per hour)…..4,860,000
Total Standard Cost…..$15,120,000
*Actual costs incurred during the current quarter follow:
Direct Materials (1,615,000 lbs @ $4.10)…..$6,621,500
Direct Labor (265,000 hrs @ $13.75)…..3,643,750
Fixed factory overhead costs…..2,350,000
Variable factory overhead costs…..2,200,000
Total actual costs…..$14,815,250
REQUIRED:
Compute the direct materials cost variance, including its price and quantity variances. Show work.
Compute the direct labor variance; including its rate and efficiency variance. Show work.
Compute the overhead controllable and volume variances. Show work.
Explanation / Answer
1)Material Price variance = AQ (AP-SP)
= 1,615,000 ( 4.10 - 4)
= 1,615,000 * .10
= 161500 (U)
Material quantity variance = SR(AQ-SQ)
= 4 (1,615,000 - 1,620,000)
= 4 *- 5000
= - 20000 (F)
MCV =MPV +MQV
= 161500 + (-20000)
= 141500(U)
2)labor rate vairance = AH (AR-SR)
= 265000 (13.75- 14)
= 265000 * -.25
= - 66250(F)
Labor efficiency variance = SR(AH -SH)
= 14 (265000 - 270000)
= 14 * - 5000
= 70,000 (F)
LCV = LRV +LEV
= -66250 + (- 70000)
= -66250 -70000
= 136250 (F)
3)overhead controllable variance = Actual factory overhead - Budgeted allowance on standard hours
= [2,350,000 + 2,200,000 ] - [2,400,000+ 2,160,000]
= 4,550,000 - 4,560,000
= - 10,000 (F)
volume variance =(Actual unit -Budgeted units)*Budgeted overhead cost per unit
= (54000 - 60,000 ) * 280
= - 6000 * 280
= 1,680,000 (U)
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