Question

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. @ $5.00 per Ib.)	$	150.00
Direct labor (7 hrs. @ $14 per hr.)		98.00
Factory overhead—variable (7 hrs. @ $7 per hr.)		49.00
Factory overhead—fixed (7 hrs. @ $9 per hr.)		63.00
Total standard cost	$	360.00

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 61,000 units per quarter. The following flexible budget information is available.

	Operating Levels
		70%		80%		90%
Production in units		42,700		48,800		54,900
Standard direct labor hours		298,900		341,600		384,300
Budgeted overhead
Fixed factory overhead	$	3,074,400	$	3,074,400	$	3,074,400
Variable factory overhead	$	2,092,300	$	2,391,200	$	2,690,100

During the current quarter, the company operated at 90% of capacity and produced 54,900 units of product; actual direct labor totaled 316,300 hours. Units produced were assigned the following standard costs.

Direct materials (1,647,000 Ibs. @ $5.00 per Ib.)	$	8,235,000
Direct labor (384,300 hrs. @ $14 per hr.)		5,380,200
Factory overhead (384,300 hrs. @ $16 per hr.)		6,148,800
Total standard cost	$	19,764,000

Actual costs incurred during the current quarter follow.

Direct materials (1,364,000 Ibs. @ $7.80 per lb.)	$	10,639,200
Direct labor (316,300 hrs. @ $11.10 per hr.)		3,510,930
Fixed factory overhead costs		2,348,400
Variable factory overhead costs		2,742,200
Total actual costs	$	19,240,730

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

	Actual Variable OH Cost -1 Flexible Budget -1 Standard Cost (VOH applied) 0 2 -1 $0 0

  
(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

Actual Variable OH Cost				Flexible Budget				Standard Cost (VOH applied)
		0
-1
				$0
				0

(c) Compute the total overhead controllable variance.

Answer 1

Solution a:

Variable Overhead Cost Variance
Actual Cost				Standard cost for actual quantity				Standard Cost
AH*	AR =			AH*	SR =			SH *	SR =
316300	$8.67	$2,742,200.00		316300	$7.00	$2,214,100.00		384300	$7.00	$2,690,100.00
			$528,100 U				$476,000 F
			Variable overhead rate Variance				Variable overhead efficiency variance

Variable overhead spending variance = $528,100 U

Variable overhead efficiency variance = $476,000 F

Solution b:

Budgeted fixed overhead = 48800*7*$9 = $3,074,400

Actual fixed overhead = $2,348,400

Fixed overhead applied = Standard hours for actual production * SR = 54900*7*$9 = $3,458,700

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

= $3,074,400 - $2,348,400 = $726,000 F

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

= $3,458,700 - $3,074,400 = $384,300 F

Solution c:

Overhead controllable variance = Variable overhead spending variance + Variable overhead efficiency variance + Fixed overhead spending variance

= $528,100 U + $476,000 F + $726,000 F = $673,900 F