ezto.mneducation.com/hm.tpx Trico Company set the following standard unit costs

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ezto.mneducation.com/hm.tpx Trico Company set the following standard unit costs for its single product. Direct materials (26 lbs. @$4.80 per lb.) Direct labor (6 hrs. @ $8.80 per hr.) Factory overhead-variable (6 hrs. $5.70 per hr.) 34.20 Factory overhead-fixed (6 hrs.@ $7.20 per hr.) $ 124.80 52.80 43.20 $ 255.00 Total standard cost The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 55,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 38,500 80% 90% Production in units Standard direct labor hours Budgeted overhead 44,000 231,000264,000 49,500 297,000 Fixed factory overhead Variable factory overhead $1,900,800 $1,900,800 $1,900,800 $ 1,316,700 $1,504,800 $1,692,900 During the current quarter, the company operated at 70% of capacity and produced 38,500 units of product actual direct labor totaled 229,400 hours. Units produced were assigned the following standard costs: Direct materials (1,001,000 lbs.@ $4.80 per lb.) 4,804,800 Direct labor (231,000 hrs.@$8.80 per hr.) Factory overhead (231,000 hrs.@$12.90 per hr.) 2,032,800 2,979,900 Total standard cost $ 9,817,500 Actual costs incurred during the current quarter follow

Explanation / Answer

IMPORTANT POINTS TO NOTE:

FIXED       OVERHEAD        VARIANCES

Expenditure variance

ACTUAL

$1837800

$1900800

$63000 FAV

LESS

BUDGET

CAPACITY   VARIANCE

VOLUME

EFFICIENCY VARIANCE

LESS

ALH X FOAR

229400 X

$7.20

$1651680

$249120 ADV

LESS

ACTUAL UNITS X

STD HRS X

FOAR

38500 X

6 HRS

X $7.20

$1663200

$11520 FAV

TOTAL

$174600 ADV

VARIABLE       OVERHEAD        VARIANCES

EXPENDITURE

ACTUAL

$1273170

$34410 FAV

LESS

EFFICIENCY

ALH X VOAR

229400HUORS

X

$5.70

$1307580

LESS

ACTUAL UNITS

X

HOURS

X

VOAR

38500 UNITS

X 6 HOURS

X $5.70

$ 1316700

$9120 FAV

IMPORTANT POINTS TO NOTE:

• As the company is running at 70% capacity and making 38600 units we have to use this data from their schedule

• We have then to compare with actual results

FIXED       OVERHEAD        VARIANCES

Expenditure variance

ACTUAL

$1837800

$1900800

$63000 FAV

LESS

BUDGET

CAPACITY   VARIANCE

VOLUME

EFFICIENCY VARIANCE

LESS

ALH X FOAR

229400 X

$7.20

$1651680

$249120 ADV

LESS

ACTUAL UNITS X

STD HRS X

FOAR

38500 X

6 HRS

X $7.20

$1663200

$11520 FAV

TOTAL

$174600 ADV

VARIABLE       OVERHEAD        VARIANCES

EXPENDITURE

ACTUAL

$1273170

$34410 FAV

LESS

EFFICIENCY

ALH X VOAR

229400HUORS

X

$5.70

$1307580

LESS

ACTUAL UNITS

X

HOURS

X

VOAR

38500 UNITS

X 6 HOURS

X $5.70

$ 1316700

$9120 FAV

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