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[The following information applies to the questions displayed below.]

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 56,000 units per quarter. The following flexible budget information is available.

During the current quarter, the company operated at 90% of capacity and produced 50,400 units of product; actual direct labor totaled 299,400 hours. Units produced were assigned the following standard costs.

Actual costs incurred during the current quarter follow.

(a) Compute the variable overhead spending and efficiency variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.)

AH = Actual Hours
SH = Standard Hours
AVR = Actual Variable Rate
SVR = Standard Variable Rate

(b) Compute the fixed overhead spending and volume variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.)

AH = Actual Hours
SH = Standard Hours
AFR = Actual Fixed Rate
SFR = Standard Fixed Rate

(c) Compute the total overhead controllable variance.

Direct materials (30 Ibs. @ $5.10 per Ib.) $ 153.00 Direct labor (6 hrs. @ $15 per hr.) 90.00 Factory overhead—variable (6 hrs. @ $7 per hr.) 42.00 Factory overhead—fixed (6 hrs. @ $11 per hr.) 66.00 Total standard cost $ 351.00

Explanation / Answer

Solution a:

Variable overhead spending variance = Variable overhead rate variance + Variable overhead efficiency variance

= $342,700 U + $21,000 F = $321,700 U

Solution b:

Budgeted fixed overhead = $2,956,800

Actual fixed overhead = $2,604,700

Fixed overhead applied = Standard hours for actual production * Predetermined overhead rate

= 50400 * 6 * $11 = $3,326,400

Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead

= $2,956,800 - $2,604,700 = $352,100 F

Fixed overhead volume variance = Fixed overehead applied - Budgeted fixed overhead

= $3,326,400 - $2,956,800 = $369,600 F

Solution c:

Total overhead controllable variance = Variable overhead spending variance + Fixed overhead spending variance

= $321,700 U + $352,100 F = $30,400 F

Variable overhead cost variance Actual Variable OH Cost Standard cost for actual hours Standard Cost AH* AR = AH* SR = SH * SR = 299400 $8.14 $2,438,500.00 299400 $7.00 $2,095,800.00 302400 $7.00 $2,116,800.00 $342,700 U $21 ,000 F Variable overhead rate variance Variable overhead efficiency variance

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