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

Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. $4.80 per Ib $144.00 Direct labor (7 hrs. @ $14 per hr.) Factory overhead-variable (7 hrs.@ $6 per 98.00 42.00 Factory overhead-fixed (7 hrs. @ $9 per hr) 63.00 Total standard cost $347.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 64,000 units per quarter. The following flexible budget information is available Operating Levels Production in units Standard direct labor hourS Budgeted overhead 70% 44,800 313,600 80% 51,200 358,400 90% 57,600 403, 200 Fixed factory overhead $3,225,600 $3,225,600 $3,225,600 Variable factory overhead $1,881,600 $2,150,400 $2,419,200

Explanation / Answer

Solution 1:

Direct material price variance= $2,572,500 U

Direct material quantity variance = $62,400 F

Direct material cost variance = $2,572,500 U + $62,400 F = 2,510,100 U

Solution 2:

Direct labor rate variance = $1,200,600 F

Direct labor efficiency variance = $42,000 F

Direct labor cost variance = $1,200,600 F + $42,000 F = $1,242,600 F

Solution 3:

Budgeted overhead for actual production = Standard variable overhead + Budgeted fixed overhead

= (57600 * 7 * $6) + $3,225,600 = $5,644,800

Actual overhead = $2,813,800 + $2,634,200 = $5,448,000

Controllable variance = Budgeted overhead - Actual overhead = $5,644,800 - $5,448,000 = $196,800 F

Fixed overhead applied = SH * SR = (57600 * 7) * $9 = $3,628,800

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = $3,628,800 - $3,225,600

= $403,200 F

Direct Material Cost Variance Actual Cost Standard cost for actual quantity Standard Cost AQ * AP = AQ * SP = SQ * SP = 1715000 $6.30 $10,804,500.00 1715000 $4.80 $8,232,000.00 1728000 $4.80 $8,294,400.00 $2,572,500 U $62,400 F Direct Material Price Variance Direct Material Qty variance

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