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

Direct materials (5 Ibs. @ $2 per Ib.) . . . . . . . . . . . . . . . . . . $10.00

Direct labor (0.3 hrs. @ $15 per hr.) . . . . . . . . . . . . . . . . . . 4.50

Factory overhead'variable (0.3 hrs. @ $10 per hr.) . . . . . 3.00

Factory overhead'fixed (0.3 hrs. @ $14 per hr.) . . . . . . . . 4.20

Total standard cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$21.70

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 600,000 units per quarter. The following flexible budget information is available.

During the current quarter, the company operated at 70% of capacity and produced 420,000 units of product; direct labor hours worked were 125,000. Units produced were assigned the following standard costs:
Direct materials (2,100,000 Ibs. @ $2 per Ib.) . . . . . . . . . $4,200,000
Direct labor (126,000 hrs. @ $15 per hr.) . . . . . . . . . . . . 1,890,000
Factory overhead (126,000 hrs. @ $24 per hr.) . . . . . . . . 3,024,000
Total standard cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,114,000
Actual costs incurred during the current quarter follow:
Direct materials (2,000,000 Ibs. @ $2.15) . . . . . . . $4,300,000
Direct labor (125,000 hrs. @ $15.50) . . . . . . . . . . 1,937,500
Fixed factory overhead costs . . . . . . . . . . . . . . . . 1,960,000
Variable factory overhead costs . . . . . . . . . . . . . . 1,200,000
Total actual costs . . . . . . . . . . . . . . . . . . . . . . . . . $9,397,500

Required
1. Compute the direct materials cost variance, including its price and quantity variances.
2. Compute the direct labor variance, including its rate and efficiency variances.
3. Compute the total variable overhead and total fixed overhead variances.
4. Compute these variances:
(a) Variable overhead spending and efficiency,
(b) Fixed overhead spending and volume, and
(c) Total overheadcontrollable.

Transcribed Image Text:

Operating Levels 70% 80% 90% 420,000 Production In unlts. Standard direct labor hours. 480,000 144,000 540,000 162,000 Budgeted overhead Varlable factory overhead. 1,260,000 440,000 620,000