Question

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Trico Company set the following standard unit costs for its single product.

Direct materials (30 Ibs. @ $4.80 per Ib.)	$	144.00
Direct labor (6 hrs. @ $14 per hr.)		84.00
Factory overhead—variable (6 hrs. @ $7 per hr.)		42.00
Factory overhead—fixed (6 hrs. @ $9 per hr.)		54.00
Total standard cost	$	324.00

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 57,000 units per quarter. The following flexible budget information is available.

	Operating Levels
		70%		80%		90%
Production in units		39,900		45,600		51,300
Standard direct labor hours		239,400		273,600		307,800
Budgeted overhead
Fixed factory overhead	$	2,462,400	$	2,462,400	$	2,462,400
Variable factory overhead	$	1,675,800	$	1,915,200	$	2,154,600

During the current quarter, the company operated at 90% of capacity and produced 51,300 units of product; actual direct labor totaled 304,800 hours. Units produced were assigned the following standard costs.

Direct materials (1,539,000 Ibs. @ $4.80 per Ib.)	$	7,387,200
Direct labor (307,800 hrs. @ $14 per hr.)		4,309,200
Factory overhead (307,800 hrs. @ $16 per hr.)		4,924,800
Total standard cost	$	16,621,200

Actual costs incurred during the current quarter follow.

Direct materials (1,519,000 Ibs. @ $7.30 per lb.)	$	11,088,700
Direct labor (304,800 hrs. @ $13.00 per hr.)		3,962,400
Fixed factory overhead costs		2,337,000
Variable factory overhead costs		2,187,800
Total actual costs	$	19,575,900

(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

Solution a:

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
304800	$7.18	$2,187,800.00			304800	$7.00	$2,133,600.00			307800	$7.00	$2,154,600.00
			$54,200.00	U				$21,000.00	F
			Variable overhead rate variance					Variable overhead efficiency variance
Variable overhead rate variance					$54,200.00	U
Variable overhead efficiency variance					$21,000.00	F
Variable overhead cost variance					$33,200.00	U

solution b:

Fixed Overhead Cost Variance

Actual Fixed OH Cost

Budgeted Fixed Overhead

Standard Cost (FOH Applies)

SH*

BR

$2,337,000.00

$2,462,400.00

307800

$9.00

$2,770,200.00

$125,400.00

F

$307,800.00

F

Fixed overhead Budget Variance

Fixed overhead volume variance

Fixed overhead Budget Variance

$125,400.00

F

Fixed overhead volume variance

$307,800.00

F

Total Fixed overhead variance

$433,200.00

F

Solution c:

Overhead controllable variance
Variable Overhead rate Variance	$54,200.00	U
Variable overhead efficiency variance	$21,000.00	F
Fixed overhead spending variance	$125,400.00	F
Overhead controllable variance	$92,200.00	F