Problem 21-4A Computation of materials, labor, and overhead variances LO P2, P T
ID: 2539459 • Letter: P
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Problem 21-4A Computation of materials, labor, and overhead variances LO P2, P The following information applies to the questions displayed below] Trico Company set the following standard unit costs for its single product Direct materials (25 lbs.@$4 per lb.) Direct labor (8 hrs.$8 per hr) Factory overhead-variable (8 hrs.@ $5 per hr) Factory overhead-fixed (8 hrs. e$7 per hr.) 100.00 64.00 40.00 56.00 $260.00 Total standard cost The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 70,000 units per quarter. The following flexible budget information is available. Operating Levels Production in units Standard direct labor hours 60% 42,000 280,000 336,000 392,000 50% 35,000 70% 49,000 Flxed factory overhead Variable factory overhead $2,352,000 $2,352,000 $2,352,000 $1,400,000 $1,680,000 $1,960,000 During the current quarter, the company operated at 70% of capacity and produced 49,000 units of product actual direct labor totaled 385,000 hours. Units produced were assigned the following standard costs Direct materials (1,225,000 lbs.@ $4 per lb.) Direct labor (392,000 hrs.$8 per hr.) Factory overhead (392,000 hrs.@ $12 per hr.) S 4,900,000 3136,000 4704,000 Total standard cost $12,740,000Explanation / Answer
Answer: Requirement 1 Direct material Actual Cost Difference Flexible Budget Difference Standard Cost Actual hours Actual Rate Actual Cost Actual hours Standard rate Standard hours Standard rate Standard cost 1,220,000 $ 4.10 $ 5,002,000.00 $ 1,220,000.00 4 4880000 1,225,000 $ 4.00 $ 4,900,000.00 $ (122,000.00) $ 20,000.00 Material price variance $ (122,000.00) ($4,880,000-$5,002,000) Material quantity variance $ 20,000.00 ($4,900,000-4,880,000) Material cost variance $ (102,000.00) (4,900,000-5,002,000) Requirement 2 Direct labour Actual Cost Difference Flexible Budget Difference Standard Cost Actual hours Actual Rate Actual Cost Actual hours Standard rate Standard hours Standard rate Standard cost 385,000 $ 7.75 $ 2,983,750.00 385,000.00 8 $ 3,080,000 392,000 $ 8.00 $ 3,136,000.00 $ 96,250.00 $ 56,000.00 Labour price variance $ 96,250.00 ($3,080,000-2,983,750) Labour quantity variance $ 56,000.00 (3,136,000-2,983,750) Labour cost variance $ 152,250.00 (3,136,000-2,983,750) Requirement 3 Controllable variance Actual overhead $ 6,610,377.00 ($3414151+3196226) Budgeted overhead $ 4,312,000.00 ($2352000+1960000) Controllable variance $ 2,298,377.00 ($6610377-4312000) Fixed overhead volume variance Budgeted fixed overhead $ 2,352,000.00 Fixed overhead cost applied $ 3,414,151.00 Fixed overhead volume variance $ (1,062,151.00) ($2,352,000-3,414,151)
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