Trico Company set the following standard unit costs for its single product. Dire
ID: 2479876 • Letter: T
Question
Trico Company set the following standard unit costs for its single product.
Direct materials (26 Ibs. @ $4.50 per Ib.)
$
117.00
Direct labor (6 hrs. @ $8.40 per hr.)
50.40
Factory overhead—variable (6 hrs. @ $4.20 per hr.)
25.20
Factory overhead—fixed (6 hrs. @ $7.90 per hr.)
47.40
Total standard cost
$
240.00
The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 70,000 units per quarter. The following flexible budget information is available.
Operating Levels
70%
80%
90%
Production in units
49,000
56,000
63,000
Standard direct labor hours
294,000
336,000
378,000
Budgeted overhead
Fixed factory overhead
$
2,654,400
$
2,654,400
$
2,654,400
Variable factory overhead
$
1,234,800
$
1,411,200
$
1,587,600
During the current quarter, the company operated at 70% of capacity and produced 49,000 units of product; actual direct labor totaled 292,300 hours. Units produced were assigned the following standard costs:
Direct materials (1,274,000 Ibs. @ $4.50 per Ib.)
$
5,733,000
Direct labor (294,000 hrs. @ $8.40 per hr.)
2,469,600
Factory overhead (294,000 hrs. @ $12.10 per hr.)
3,557,400
Total standard cost
$
11,760,000
Actual costs incurred during the current quarter follow:
Direct materials (1,218,000 Ibs. @ $4.77 per lb.)
$
5,809,860
Direct labor (292,300 hrs. @ $8.13 per hr.)
2,376,399
Fixed factory overhead costs
2,604,400
Variable factory overhead costs
1,183,815
Total actual costs
$
11,974,474
Required:
(a)
Compute the variable overhead spending and efficiency variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.)
Trico Company set the following standard unit costs for its single product.
Explanation / Answer
a. Variable overhead spending and efficiency variances:
Variable overhead spending variance : Standard variable overhead cost for actual level of output - Actual variable overhead cost incurred = 294,000 x $ 4.20 - $ 1,183,815 = $ 50,985 F
Variable overhead rate variance: ( Standard rate per hour - Actual rate per hour) x Actual hours worked = ( $ 4.20 - $ 4.05) x 292,300 = $ 43,845 F
Variable overhead efficiency variance : ( Standard hours for actual output - Actual hours worked) x Standard hourly rate = ( 294,000 - 292,300) x $ 4.20 = $ 7,140 F
b. Fixed overhead spending and volume variances:
Fixed overhead spending variance: Standard fixed overhead at actual output - Actual fixed overhead incurred = $ 7.90 x 294,000 - $ 2,604,400 = 281,800 U
Fixed overhead volume variance : ( Standard fixed overhead cost - Budgeted fixed overhead cost ) = ( 294,000 x $
7.90 - 336,000 x $ 7.90) = $ 331,800 U
Fixed overhead cost variance = Budgeted fixed overhead cost - Actual fixed overhead cost incurred = $ 2,654,400 - $ 2,604,400 = $ 50,000 F
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.