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 lbs. $4 per lb.) Direct labor (5 hrs. $14 per hr.) Factory overhead-variable (5 hrs. @ $8 per hr.) Factory overhead-fixed (5 hrs. $10 per hr.) $ 120.00 70.00 40.00 50.00 Total standard cost $280.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available Operating Levels 90% Production in unitS Standard direct labor hours Budgeted overhead 70% 42,000 210,000 80% 48,000 240,000 54,000 270,000 Fixed factory overhead Variable factory overhead $2,400,000 $2,400,000 $2,400,000 $1,680,000 $1,920,000 $2,160,000 During the current quarter, the company operated at 90% of capacity and produced 54,000 units of product; actual direct labor totaled 265,000 hours. Units produced were assigned the following standard costs Direct materials (1,620,000 lbs. $4 per lb.) Direct labor (270,000 hrs. @ $14 per hr.) Factory overhead (270,000 hrs. $18 per hr.) $ 6,480,000 3,780,000 4,860,000 Total standard cost $ 15,120,000

Explanation / Answer

(1) Variable Overhead Price Variance = (Standard Rate - Actual Rate) * Actual hrs.

                                                               (9.11-2200000/265000) * 265000 =214150

(2) Variable overhead Efficiency veriance = ( Standard hrs. - Actual hrs)* Standard rate

= (270000-265000)*9.11= 45550                                                                        

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