Question

Use the following information for the Problems below. (The following information applies to the questions displayed below.) Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4.40 per Ib.) Direct labor (6 hrs. @ $14 per hr.) Factory overhead-variable (6 hrs. @ $9 per hr.) Factory overhead-fixed (6 hrs. @ $12 per hr.) Total standard cost $132.00 84.00 54.00 72.00 $342.00 $372.00 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 70% 80% 38,500 44,000 231,000 264,000 90% 49,500 297,000 Production in units Standard direct labor hours Budgeted overhead Fixed factory overhead Variable factory overhead $3,168,000 $3,168,000 $3,168,000 $2,079,000 $2,376,000 $2,673,000 During the current quarter, the company operated at 90% of capacity and produced 49,500 units of product; actual direct labor totaled 292,000 hours. Units produced were assigned the following standard costs. $6.534.000 Direct materials (1,485,000 Ibs. $4.40 per Ib.) Direct labor (297,000 hrs. @ $14 per hr.) Factory overhead (297,000 hrs. @ $21 per hr.) 4,158,000 6,237,000

Answer 1

Solution 1:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
1474000	$7.40	$10,907,600.00			1474000	$4.40	$6,485,600.00			1485000	$4.40	$6,534,000.00
			$4,422,000.00	U				$48,400.00	F
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$4,422,000.00	U
Direct material quantity variance					$48,400.00	F
Direct material cost variance					$4,373,600.00	U

Solution 2:

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
292000	$12.50	$3,650,000.00			292000	$14.00	$4,088,000.00			297000	$14.00	$4,158,000.00
			$438,000.00	F				$70,000.00	F
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$438,000.00	F
Direct Labor Efficiency variance					$70,000.00	F
Direct labor cost variance					$508,000.00	F

Solution 3:

Controllable Variance
Actual overhead	$5,837,000.00
Budgeted overhead	$5,841,000.00
Controllable variance	$4,000.00	F

Fixed overhead volume variance
Budgeted fixed overhead	$3,168,000.00
Fixed overhead cost applied	$3,564,000.00
Fixed overhead volume variance	$396,000.00	F