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

Question

Trico Company set the following standard unit costs for its single product Direct materials (26 lbs.@ $5 per lb.) Direct labor (10 hrs. @ $10 per hr) Factory overhead-variable (10 hrs.@$6 per hr) Factory overhead-fixed (10 hrs. $9 per hr.) S 130.00 100.00 60.00 90.00 Total standard cost $ 380.00 The predetermined overhead rate is based on a planned operating volume of 70% of the productive capacity of 70,000 units per quarter. The following flexible budget information is available Operating Levels 60% 42,000 420,000 70% 49,000 490,000 80% Production in units Standard direct labor hours Budgeted overhead 56,000 560,000 Fixed factory overhead Variable factory overhead $ 4.410,000 4.410,000 4,410,000 $2,520,000 $2,940,000 3,360,000 During the current quarter, the company operated at 80% of capacity and produced 56,000 units of product; actual direct labor totaled 552,000 hours. Units produced were assigned the following standardl costs: Direct materials (1456,000 lbs. @ $5 per lb.) Direct labor (560,000 hrs.@ $10 per hr.) Factory overhead (560,000 hrs. $15 per hr.) $ 7.280,000 5,600,000 8.400,000 Total standard cost $ 21.280,000 Actual costs incurred during the current quarter follow: Direct materials (1,451,000 lbs.$5.10 per lb.) Direct labor (552,000 hrs.@ $9.75 per hr.) Fixed factory overhead costs Variable foctory overhead costs 5 7400,100 5,382,000 4,895,094 4,582,642 Total actual costs 22,259,836

Explanation / Answer

Solution 3:

Actual overhead = $4,895,094 + $4,582,642 = $9,477,736

Budgeted overhead for standard hours allowed = Fixed budgted overhead + Budgeted variable overhead

= $4,410,000 + $3,360,000 = $7,770,000

Controllable variance = Budgeted overhead - Actual overhead = $9,477,736 - $7,770,000 = $1,707,736 U

Budgeted fixed overhead = $4,410,000

Fixed overhead cost applied = 560000 (Standard hours) * $9 (Predetermined rate) = $5,040,000

Fixed overhead volume variance = Fixed overhead cost applied - Budgeted fixed overhead

= $5,040,000 - $4,410,000 = $630,000 F

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