e ezto.mheducation.com/hm.tpx Trico Company set the following standard unit cost

Question

e ezto.mheducation.com/hm.tpx Trico Company set the following standard unit costs for its single product Direct materials (30 lbs. $4.30 per lb.) Direct labor (6 hrs. @ $7.80 per hr) Factory overhead-variable (6 hrs. $4.50 per hr) 27 00 Factory overhead fixed (6 hrs. @ $7.50 per hr.) $129.00 46.80 45.00 $247.80 Total standard cost 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 available. Operating Levels 70% 42,000 252,000 80% 48,000 288,000 90% Production in units Standard direct labor hours Budgeted overhead 54,000 324,000 Fixed factory overhead Variable factory overhead $ 2,160,000 $2,160,000 $2,160,000 $ 1,134,000 $1,296,000 $1,458,000 During the current quarter, the company operated at 70% of capacity and produced 42,000 units of product, actual direct labor totaled 249,600 hours. Units produced were assigned the following standard costs: Direct materials (1,260,000 lbs. @$4.30 per lb.) Direct labor (252,000 hrs.$7.80 per hr.) Factory overhead (252,000 hrs.@$12.00 per hr.) $5,418,000 1,965,600 3,024.000 Total standard cost $ 10,407,600 Actual costs incurred during the current quarter follow

Explanation / Answer

Variable Overhead Actual Variable OH Cost Flexible Budget Standard Cost(VOH applied) Actual Quantity*Actual rate Actual Quantity*Standard rate Standard Quantity*Standard rate 1085760 Given 42000*27 41600*27 1134000 1123200 VOH Spending variance VOH Efficiency Variance =1134000-1085760 =1123200-1134000 48240 Favourable -10800 Unfavourable Total VOH Variance 37440 Favourable Fixed Overhead Actual Fixed OH Cost Flexible Budget Standard Cost(FOH applied) Actual Quantity*Actual rate Actual Quantity*Standard rate Standard Quantity*Standard rate 2105000 Given 42000*45 41600*45 1890000 1872000 FOH Spending Variance FOH Volume Variance =1890000-2105000 =1872000-1890000 -215000 Unfavourable -18000 Unfavourable Total FOH Variance -233000 Unfavourable

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