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 (30 lbs.$4 per lb.) Direct labor (5 hrs. O $14 per hr) Factory overhead-variable (5 hrs@$8 per hr) Factory overhead fixed (5 hrs. $10 per hr) $ 120.00 7000 4000 5000 Total standerd cost $28000 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is avallable 80% 48,000 Production in units Standerd direct labor hours Budgeted overhead 42,000 210,000 240.000270,000 $2.400,0004428 Fixed factory overheed Varlable fectory overhead 2.400,000 $2.400,000 $24 $1,680,000 $1,920,000 $ 2160,000 During the current quarter, the company opereted at 90% of capacity and produced 54,000 unitsof product actual direct labor totaled 265,000 hours, units produced were assigned the following standard costs: Direct materials (1,620,000 lbs @$4 per ib) Direct labor (270,000 hrs. $14 per hr) Factory overheed (270,000 hrs.@$18 per hr) 6,480.000 3780000 . 4,860,000 Total standard cost $ 15,120,000

Explanation / Answer

Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U Material price variance = (AP-SP)*AQ AP = Actual price per unit = $4.1 SP = Standard price per unit = $4 AQ = Actual quantity consumed= 1615000 F= Favourable U = Unfavourable Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U 4.1 4 -0.1 1615000 -161500 Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U Material quantity variance = (AQ-SQ)*SP AQ = Actual quantity consumed= 1615000 SQ = Standard quantity = 2000*6 = 30*54000 = 1620000 SP = Standard price per unit = $4 F= Favourable U = Unfavourable Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U 1615000 1620000 5000 4 20000 F Total Material variance Total Actual Total Std Total variance F/U 6621500 6480000 -141500 F (1620000*4) Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U Labor Rate variance = (AR-SR)*AH AR = Actual Rate per hour = $13.75 SR = Standard Rate per hour = $14 AH = Actual hours = 265000 F= Favourable U = Unfavourable Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U 13.75 14 0.25 265000 66250 F Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) AR (d) Total variance (e=c*d) F/U Labor Efficiency variance = (AH-SH)*AR AH = Actual hours = 265000 SH = Standard Hours = 5*54000 = 270000 SR = Standard Rate per hour = $14 F= Favourable U = Unfavourable Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) SR (d) Total variance (e=c*d) F/U 265000 270000 5000 14 70000 F Total Labor variance Total Actual Total Std Total variance F/U 3643750 3780000 136250 F (270000*14) FOH controllable variance Actual FOH Budgeted FOH Total variance F/U FOH budget variance = Actual FOH - Budgeted FOH FOH = Fixed overhead F= Favourable U = Unfavourable FOH controllable variance Actual FOH Budgeted FOH Total variance F/U 2350000 2400000 50000 F FOH volume variance Budgeted FOH Applied FOH Total variance F/U FOH volume variance = Budgeted FOH - Applied FOH Applied FOH = Pre-determined overhead rate*Standard direct labor hours allowed for actual output Pre-determined overhead rate = $10 per direct labor hour Standard direct labor hours allowed for actual output = 5*54000 = 270000 Applied FOH = $10*2700000 = $2700000 FOH = Fixed overhead F= Favourable U = Unfavourable FOH volume variance Budgeted FOH Applied FOH Total variance F/U 2400000 2700000 300000 F Total FOH variance Total Actual Total Std Total variance F/U 2350000 2700000 350000 F

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