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 (30 Ibs. $5.10 per Ib.) Direct labor (4 hrs. $15 per hr. 60.00 Factory overhead-variable (4 hrs. e $6 per hr.) Factory overhead-fixed (4 hrs. « $11 per hr.) Total standard cost $153.00 24.00 44.00 $281.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 68,000 units per quarter. The following flexible budget information is available Operating Levels Production in units Standard direct labor hours Budgeted overhead 70% 47,600 190,400 80% 54,400 217,600 90% 61,200 244,800 Fixed factory overhead Variable factory overhead $2,393,600 $2,393,600 $2,393,600 $1,142,400 $1,305,600 $1,468,800 During the current quarter, the company operated at 90% of capacity and produced 61,200 units of product; actual direct labor totaled 239,800 hours. Units produced were assigned the following standard costs. Direct materials (1,836,000 Ibs. 2 $5.10 per Ib.) Direct labor (244,800 hrs. $15 per hr.) Factory overhead (244,800 hrs. e $17 per hr.) Total standard cost $9,363,600 3,672,000 4,161,600 $17,197,200 Actual costs incurred during the current quarter follow Direct materials (1,826,000 Ibs. e $6.70 per lb.) Direct labor (239,800 hrs. 6 $12.00 per hr.) Fixed factory overhead costs Variable factory overhead costs Total actual costs 12,234,200 2,877,600 1,942,800 1,818,800 $18,873,400

Explanation / Answer

Solution a:

Variable Overhead Spending Variance = Variable OH Rate Variance +Variable OH Efficiency Variance

= $380,000 U + $30,000 F = $350,000 U

Solution b:

Solution c:

Variable overhead Cost Variance Actual Variable OH Cost Flexible Budget Standard Cost AH* AR = AH* SR = SH * SR = 239800 $7.5847 $1,818,800.00 239800 $6.00 $1,438,800.00 244800 $6.00 $1,468,800.00 $380,000 U $30,000 F Varaible overhead rate Variance Variable overhead efficiency variance

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