Question
Trico Company set the following standard unit costs for its single product. Direct materials (29 Ibs. @ $5 per Ib.) $ 145.00 Direct labor (10
Trico Company set the following standard unit costs for its single product. |
Direct materials (29 Ibs. @ $5 per Ib.) | $ | 145.00 |
Direct labor (10 hrs. @ $10 per hr.) | 100.00 | |
Factory overheadvariable (10 hrs. @ $6 per hr.) | 60.00 | |
Factory overheadfixed (10 hrs. @ $9 per hr.) | 90.00 | |
Total standard cost | $ | 395.00 |
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 | ||||||
70% | 80% | 90% | ||||
Production in units | 42,000 | 48,000 | 54,000 | |||
Standard direct labor hours | 420,000 | 480,000 | 540,000 | |||
Budgeted overhead | ||||||
Fixed factory overhead | $ | 4,320,000 | $ | 4,320,000 | $ | 4,320,000 |
Variable factory overhead | $ | 2,520,000 | $ | 2,880,000 | $ | 3,240,000 |
During the current quarter, the company operated at 90% of capacity and produced 54,000 units of product; actual direct labor totaled 537,000 hours. Units produced were assigned the following standard costs: |
Direct materials (1,566,000 Ibs. @ $5 per Ib.) | $ | 7,830,000 |
Direct labor (540,000 hrs. @ $10 per hr.) | 5,400,000 | |
Factory overhead (540,000 hrs. @ $15 per hr.) | 8,100,000 | |
Total standard cost | $ | 21,330,000 |
Actual costs incurred during the current quarter follow: |
Direct materials (1,561,000 Ibs. @ $5.10 per lb.) | $ | 7,961,100 |
Direct labor (537,000 hrs. @ $9.75 per hr.) | 5,235,750 | |
Fixed factory overhead costs | 4,762,075 | |
Variable factory overhead costs | 4,458,113 | |
Total actual costs | $ | 22,417,038 |
|
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 overhead controllable and volume variances. |
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