Question
1. Compute the direct materials cost variance, including its price and quantity variances.
2. Compute the direct labor cost variance, including its rate and efficiency variances.
3. Compute the overhead controllable and volume variances.
Required Information The foowing Saomation spaies to the questions clapieyed below Trico Company set the following ptsndard unt costs for it; Single product Direct naterials (38 Ibs. $4.80 per Ib. $128.ae Direct labor (7 hrs.$14 per hr) Factory 98.8e overhead-wariable (7 hrs. $7 per 49.ee Factory overhead-fixed (7 hrs. @ $11 per hr.)77.ee- Total standard cost 344.e0 The predetermined overhead rste i, based on planned operating volume of 80% of the productive capacity of 63,000 unlts per quarter. The following flexdble budget Information ls available 98% 44,108 Production in units Standard direct labor hours Budgeted overhead 58,480 352,88e 396,90 Fixed factory overhead 3,880,888 $3,88,880 $3,88e,883 Variable factory overhead $2,168,998 2,469,68e $2,778,300 During the current quarter, the company opersted at 90% of capacity and produced 56,700 units of product; 5ctual direct lsbor totaled 393,900 hours. Units produced were asalgned the following atandard coats Direct naterials(1,7e1,e00 Ibs. $4.80 per Ib.) Direct 1abor (396,988 hrs. $14 per hr.) 5,556,68 Factory overhead (396,9a0 hrs. s18 per 7,144,203 hr Total standard cost 6,884,eea $19 ,504, Bee Actusl costs Incurred during the current quarter follow. Direct materials 1,686,eee Ibs. @ $5.18 per lb.) Direct labor (393,9e8 hrs. $12.ee per hr.) 4,726,88e Fixed factory overhead costs Variable factory overhead costs Total actual costs s 8,598,eae 3,388,eae 3,164,288 19, 869,680
Explanation / Answer
Solution:
1) Calculation of the Direct Materials Cost Variance, Including its Price and Quantity Variances:
2) Calculation of the Direct Labor Cost Variance, Including its Rate and Efficiency Variances:
3) Calculation of the Overhead Controllable and Volume Variances:
Actual Cost Standard Cost AQ * AP AQ * SP SQ * SP 1,686,000 * $5.10 1,686,000 * $4.00 1,701,000 * $4.00
$8,598,600 $6,744,000 $6,804,000 $1,854,600 (Unfavorable) (Price variance) $60,000 (Favorable) (Quantity variance) Direct materials price variance $1,854,600 Unfavorable Direct materials quantity variance $60,000 Favorable Total direct materials variance $1,794,600 Unfavorable
