Required Informatlon IThe following Information appliles to the questions displa

Question

Required Informatlon IThe following Information appliles to the questions displayed below. Trico Company set the following standard unit costs for Its single product. Direct materials (30 Ibs. $5.10 per Ib.) Direct labor (8 hrs. $15 per hr.) Factory overhead-variable (8 hrs. $6 per hr.) Factory overhead-fixed (8 hrs. $9 per hr.) Total standard cost $ 153.ee 12e.ee 48.00 72.e0 $393.6e The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 65,000 units per quarter. The following flexible budget Information is avallable Production in units Standard direct labor hours Budgeted overhead 80% 52.80 416,eee 90% 58.50 468,000 45, 5ee 364,8ee Fixed factory overhead Variable factory overhead $3,744,eee $3,744,ee0 $3,744,eee $2,184,eee $2,496,ee0 $2,808,eee During the current quarter, the company operated at 90% of capacity and produced 58,500 units of product, actual direct labor totaled 465,000 hours. Units produced were assigned the following standard costs Direct materials (1,755,eee Ibs. S5.1e per Ib.) Direct labor (468,eee hrs.$15 per hr.) Factory overhead (468,eee hrs. $15 per hr.) Total standard cost $ 8,95e,5ee 7,020,8ee 7,028,eee $22,99e,5ee Actual costs Incurred during the current quarter follow Direct materials (1,741,eee Ibs. $7.ee per lb.) Direct labor (465,eee hrs. $11.50 per hr.) Fixed factory overhead costs Variable factory overhead costs Total actual costs $12,187,eee 5,347,5ee 3,315,8ee 3,104,2ee $23,954,500

Explanation / Answer

1.

A. Direct Material Cost Variance:

Direct Material Cost Variance = Standard Direct Material Cost - Actual Direct Material Cost = 8,950,500 - 12,187,000 = (3,236,500) Unfavourable

B. Material Price Variance:

Material Price Variance = Actual Quantity used * ( Standard Price per unit - Actual Price per unit) = 1,741,000*(5.10-7.00) = (3,307,900) Unfavourable

C. Material Quantity Variance:

Material Quantity Variance = Standard Price per unit * (Standard Quantity required - Actual Quantity used) = 5.10*(1,755,000-1,741,000) = 71,400 Favourable

2.

A. A. Direct Labour Cost Variance:

Direct Labour Cost Variance = Standard Labour Cost - Actual Labour Cost = 7,020,000 - 5,347,500 = 1,672,500 Favourable

B. Labour Price Variance:

Labour Price Variance = Actual Labour Hour used * ( Standard rate per unit - Actual rate per unit) = 465,000*(15-11.50) = 1,627,500 Favourable

C. Labour Quantity Variance:

Labour Quantity Variance = Standard rate per unit * (Standard labour hours required - Actual labour hours used) = 15*(468,000-465,000) = 45,000 Favourable

3.(a)

Actual Variable Overhead Rate = 3,104,200 / 465,000 = 66.75

Variable Overhead Spending Variance = Actual Hours worker * (Standard Overhead Rate - Actual Overhead Rate) = 465,000*(6-6.68) = (314,200) Unfavourable

Variable Overhead Efficiency Variance = Standard Overhead Rate * (Standard Hours Worked - Actual Hours Worked) = 6*(468000-465000) = 18,000 Favourable

3(b)

Actual Fixed Overhead = 3,315,800

Budgeted Overhead = 3,744,000

Standard Overhead (FOH Applied) = 468,000*9 = 4,212,000

Fixed Overhead Spending Variance = Budgeted Fixed Ovehead - Actual Fixed Overhead = 3,744,000 - 3,315,800 = 428,200 Favourable

Fixed Overhead Volume Variance = Standard Overhead - Budgeted Fixed Overhead = 4,212,000 - 3,744,000 = 468,000 Favourable

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