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

Question

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

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 66,000 units per quarter. The following flexible budget information is available.

During the current quarter, the company operated at 90% of capacity and produced 59,400 units of product; actual direct labor totaled 303,800 hours. Units produced were assigned the following standard costs.

Actual costs incurred during the current quarter follow.

Direct materials (30 Ibs. @ $4.80 per Ib.) $ 144.00 Direct labor (6 hrs. @ $14 per hr.) 84.00 Factory overhead—variable (6 hrs. @ $7 per hr.) 42.00 Factory overhead—fixed (6 hrs. @ $12 per hr.) 72.00 Total standard cost $ 342.00

Explanation / Answer

1. Material Variance Actual Cost Standard Cost Quantity Rate Actual Cost Quantity Rate Standard Cost 1,522,000 $   7.30 $            11,110,600.00     1,782,000.00 $              4.80 $ 8,553,600.00 (a) (b) ('c) (d) ('e) (f) i. Material Price Variance (MPV) (e - b) X d $ (4,455,000.00) Adverse ii. Material Quantity Variance (MQV) (d - a) X b $   1,898,000.00 Favourable iii. Direct Material Cost Variance (MCV) f - c $ (2,557,000.00) Adverse Check (MCV = MPV + MQV) $ (2,557,000.00) Adverse 2. Labour Variance Actual Cost Standard Cost Quantity Rate Actual Cost Quantity Rate Standard Cost 303,800 $ 13.10 $              3,979,780.00        356,400.00 $            14.00 $ 4,989,600.00 (g) (h) (I) (j) (k) (L) iv. Labour Rate Variance (k - h) X j $      320,760.00 Favourable v. Labour Efficiency Variance (LEV) (j - g) X k $      736,400.00 Favourable vi. Labour Cost Variance (LCV) ( L - I) $   1,009,820.00 Favourable Check (LCV = LRV + LEV) $   1,057,160.00 Favourable 3. Overhead Variance vii. Overhead Controllable Variance Actual overhead - Standard Overheads (m) Actual Overheads $   4,971,600.00 (n) Standard Overheads $ 6,771,600.00 Fixed $   2,333,900.00 Variable $   2,637,700.00 $ (1,800,000.00) Favourable viii. Fixed Overhead Volume Variance (o)   Actual Fixed Overheads $   2,336,900.00 (p) Budgeted Fixed Overheads $ 3,801,600.00 $ (1,464,700.00) Favourable

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