Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4 per Ib.) $ 120.00 Direct labor (5 hrs. @ $14 per hr.) 70.00 Factory overhead—variable (5 hrs. @ $8 per hr.) 40.00 Factory overhead—fixed (5 hrs. @ $10 per hr.) 50.00 Total standard cost $ 280.00 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% 80% 90% Production in units 42,000 48,000 54,000 Standard direct labor hours 210,000 240,000 270,000 Budgeted overhead Fixed factory overhead $ 2,400,000 $ 2,400,000 $ 2,400,000 Variable factory overhead $ 1,680,000 $ 1,920,000 $ 2,160,000 During the current quarter, the company operated at 90% of capacity and produced 54,000 units of product; actual direct labor totaled 265,000 hours. Units produced were assigned the following standard costs. Direct materials (1,620,000 Ibs. @ $4 per Ib.) $ 6,480,000 Direct labor (270,000 hrs. @ $14 per hr.) 3,780,000 Factory overhead (270,000 hrs. @ $18 per hr.) 4,860,000 Total standard cost $ 15,120,000 Actual costs incurred during the current quarter follow. Direct materials (1,615,000 Ibs. @ $4.10 per lb.) $ 6,621,500 Direct labor (265,000 hrs. @ $13.75 per hr.) 3,643,750 Fixed factory overhead costs 2,350,000 Variable factory overhead costs 2,200,000 Total actual costs $ 14,815,250

(a) Compute the variable overhead spending and efficiency variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.)

(b) Compute the fixed overhead spending and volume variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.)

(c) Compute the total overhead controllable variance.

Answer 1

Part A

Actual variable OH cost				Flexible budget				Standard cost (VOH applied)
AH	x	AVR		AH	x	SVR		SH	x	SVR
265000	x	8.30 (2200000/265000)		265000	x	8		270000	x	8
	2200000				2120000				2160000
			80000 (2200000-2120000)				40000 (2160000-2120000)

Variable overhead spending variance	$ 80000	Unfavorable
Variable overhead efficiency variance	40000	favorable
Total variable overhead variance	$ 40000	Unfavorable

Part B

Actual fixed OH cost				Budgeted overhead				Standard cost (FOH applied)
AH	x	AFR						SH	x	SFR
265000		8.87 (2350000/265000)						270000	x	10
	2350000				2400000				2700000
			50000 (240000-2350000)				300000 (2700000-2400000)

Fixed overhead spending variance	50000	favorable
Fixed overhead volume variance	300000	favorable
Total fixed overhead variance	350000	favorable

Part C

Overhead controllable variance

Variable overhead spending variance	80000	Unfavorable
Variable overhead efficiency variance	40000	favorable
Fixed overhead spending variance	50000	favorable
Total overhead controllable variance	10000	favorable