Need help with the controllable variance, and fixed overhead volume variance. Tr
ID: 2430523 • Letter: N
Question
Need help with the controllable variance, and fixed overhead volume variance.
Trico Company set the following standard unit costs for its single product.
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.
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.
Actual costs incurred during the current quarter follow.
Required:
1. Compute the direct materials cost variance, including its price and quantity variances.
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
Explanation / Answer
Answer
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quantity
(
$ 4.40
-
$ 7.40
)
x
1474000
-4422000
Variance
$ 4,422,000.00
Unfavourable-U
Material Quantity Variance
(
Standard Quantity
-
Actual Quantity
)
x
Standard Rate
(
1485000
-
1474000
)
x
$ 4.40
48400
Variance
$ 48,400.00
Favourable-F
Direct Material Cost Variance
(
Standard Cost
-
Actual Cost
)
(
$ 6,534,000.00
-
$ 10,907,600.00
)
-4373600
Variance
$ 4,373,600.00
Unfavourable-U
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quantity
(
$ 4.40
-
$ 7.40
)
x
1474000
-4422000
Variance
$ 4,422,000.00
Unfavourable-U
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