Question

Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $5.10 per Ib.) $ 153.00 Direct labor (8 hrs. @ $14 per hr.) 112.00 Factory overhead—variable (8 hrs. @ $6 per hr.) 48.00 Factory overhead—fixed (8 hrs. @ $12 per hr.) 96.00 Total standard cost $ 409.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 52,000 units per quarter. The following flexible budget information is available. Operating Levels 70% 80% 90% Production in units 36,400 41,600 46,800 Standard direct labor hours 291,200 332,800 374,400 Budgeted overhead Fixed factory overhead $ 3,993,600 $ 3,993,600 $ 3,993,600 Variable factory overhead $ 1,747,200 $ 1,996,800 $ 2,246,400 During the current quarter, the company operated at 90% of capacity and produced 46,800 units of product; actual direct labor totaled 370,400 hours. Units produced were assigned the following standard costs. Direct materials (1,404,000 Ibs. @ $5.10 per Ib.) $ 7,160,400 Direct labor (374,400 hrs. @ $14 per hr.) 5,241,600 Factory overhead (374,400 hrs. @ $18 per hr.) 6,739,200 Total standard cost $ 19,141,200 Actual costs incurred during the current quarter follow. Direct materials (1,385,000 Ibs. @ $6.70 per lb.) $ 9,279,500 Direct labor (370,400 hrs. @ $11.50 per hr.) 4,259,600 Fixed factory overhead costs 3,196,600 Variable factory overhead costs 3,016,800 Total actual costs $ 19,752,500 Problem 23-4A Computation of materials, labor, and overhead variances LO P2, P3 Required: 1. Compute the direct materials cost variance, including its price and quantity variances.

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

Answer 1

Answer in summary form
Material
Material price variance	2,216,000	Unfavorable
Material quantity variance	96,900	Favorable
Material cost variance (Total of both variance)	2,119,100	Unfavorable
Labor
Labor price (rate) variance	926,000	Favorable
Labor quantity (efficiency) variance	56,000	Favorable
Labor cost variance (Total of both variance)	982,000	Favorable
Variable overhead
Variable overhead spending variance	792,656	Unfavorable
Variable overhead efficiency variance	24,000	Favorable

	Minus sign indicate unfavorable variance.
	Measure	Pound
	Standard price per Pound	$              5.10
	Actual price per Pound	$              6.70
46800*30	Standard quantity in Pounds	1404000
	Actual quantity in Pounds	1385000
	Standard price per Pound	5.10
Less	Actual price per Pound	-6.70
	Difference	-1.60
Multiply	Actual quantity in Pounds	1385000
	Material price variance	$ (2,216,000)
	Indicate	Unfavorable
	Standard quantity in Pounds	1404000
Less	Actual quantity in Pounds	-1385000
	Difference	19000
Multiply	Standard price per Pound	5.10
	Material quantity variance	$          96,900
	Indicate	Favorable
	Material cost variance (Total of both variance)	$ (2,119,100)
	Indicate	Unfavorable

	Minus sign indicate unfavorable variance.
	Measure	Hour
	Standard price per Hour	$          14.00
	Actual price per Hour	$          11.50
46800*8	Standard labor Hours	374400
	Actual labor Hours	370400
	Standard price per Hour	14.00
Less	Actual price per Hour	-11.50
	Difference	2.50
Multiply	Actual labor Hours	370400
	Labor price (rate) variance	$     926,000
	Indicate	Favorable
	Standard labor Hours	374400
Less	Actual labor Hours	-370400
	Difference	4000
Multiply	Standard price per Hour	14.00
	Labor quantity (efficiency) variance	$        56,000
	Indicate	Favorable
	Labor cost variance (Total of both variance)	$     982,000
	Indicate	Favorable

	Minus sign indicate unfavorable variance.
	Measure	Hour
	Standard variable overhead rate per Hour	$              6.00
3016800/370400	Actual variable overhead rate per Hour (Rounded)	$              8.14
46800*8	Standard Hours	374400
	Actual Hours	370400
	Standard variable overhead rate per Hour	6.00
Less	Actual variable overhead rate per Hour (Rounded)	-8.14
	Difference	-2.14
Multiply	Actual Hours	370400
	Variable overhead spending variance	$    (792,656)
	Indicate	Unfavorable
	Standard Hours	374400
Less	Actual Hours	-370400
	Difference	4000
Multiply	Standard variable overhead rate per Hour	6.00
	Variable overhead efficiency variance	$         24,000
	Indicate	Favorable