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

Question

7. Trico Company set the following standard unit costs for its single product Direct materials (26 lbs.$4.80 per lb.) Direct labor (6 hrs. @ $8.80 per hr.) Factory overhead-variable (6 hrs. @$5.70 per hr.) 34.20 Factory overhead-fixed (6 hrs. @ $7.20 per hr) $124.80 52.80 43.20 $255.00 Total standard cost The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 55,000 units per quarter. The following flexible budget information is available. Operating Levels Production in units Standard direct labor hours Budgeted overhead 80% 44,000 231,000 264,000 297,000 70% 38,500 90% 49,500 Fixed factory overhead Variable factory overhead $ 1,900,800 $1,900,800 $ 1,900,800 $1,316,700 $1,504,800 $ 1,692,900 During the current quarter, the company operated at 70% of capacity and produced 38,500 units of product actual direct labor totaled 229,400 hours. Units produced were assigned the following standard costs: Direct materials (1,001,000 lbs.@$4.80 per lb.) $ 4,804,800 Direct labor (231,000 hrs.$8.80 per hr.) Factory overhead (231,000 hrs.@$12.90 per hr.) 2,979,900 2,032,800 Total standard cost $ 9,817,500

Explanation / Answer

(a) Computation of Variable Overhead Efficiency and Specndiing variances Actual variable OH cost Flexible budget Standard cost (VOH applied) Actual Hours Actual rate Actual Hours Standard rate Standard hours Standard rate 231000 $5.70 264000 $5.70 $       12,73,170 $       13,16,700 $       15,04,800 Specding variances ($43530 )Favorable Efficiency variance ($188100) Favorables (1273170-1316700) ($1316700-1504800) (b) Computation fixed manufacturing Overhead Spending And Volume variances Actual Fixed OH cost Flexible budget Fixed OH cost Fixed over head cost appiled Actual Hours Actual rate Actual Hours Standard rate Standard hours Standard rate 231000 $7.2 264000 $7.2 $       18,37,800 $       16,63,200 $       19,00,800 Specding variances $174600 Unfavorable Efficiency variance ($237600) Favorables (1837800-1663200) ($1663200-1900800) (c ) Total Overhead contollable variance Actual Total over head Incurred (1273170+1837800) 3110970 Budgeted total Overhead(1504800+1900800) 3405600 Total Controllable variance ($294630) Favarable

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