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

Question

Trico Company set the following standard unit costs for its single product. Direct materials (28 Ibs. $5.00 per lb.) Direct labor (10 hrs. $10.00 per hr.) Factory overheadvariable (10 hrs. $6.00 per hr.) Factory overhead -fixed (10 hrs. $9.00 per hr.) $140.00 00.00 60.00 90.00 Total standard cost $390.00 The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 40,000 units per quarter. The following flexible budget information is available Operating Levels 50% 20,000 200,000 60% 24,000 240,000 70% Production in units Standard direct labor hours Budgeted overhead 28,000 280,000 Fixed factory overhead Variable factory overhead $ 2,160,000 2,160,000 2,160,000 $1,200,000 $1,440,000 $ 1,680,000 During the current quarter, the company operated at 70% of capacity and produced 28,000 units of product; actual direct labor totaled 276,000 hours. Units produced were assigned the following standard costs Direct materials (784,000 lbs.@ $5.00 per lb.) Direct labor (280,000 hrs. $10.00 per hr.) Factory overhead (280,000 hrs.$15.00 per hr.) $ 3,920,000 2,800,000 4,200,000 Total standard cost $ 10,920,000

Explanation / Answer

Actual cost Standard cost AQ X AR AQ X SP SQ X SP 779000 X 5.10 779000 X 5 784000 X 5 3972900 3920000 Direct material price variance    [AQ(AP-SP)=[779000(5.10-5)] 77900 U Direct material quantity variance [SR(AQ-SQ)] = [5(779000-784000)] -25000 F Total direct material variance 52900 U

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