Question

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

Direct materials (30 Ibs. @ $4.80 per Ib.)	$	144.00
Direct labor (8 hrs. @ $16 per hr.)		128.00
Factory overhead—variable (8 hrs. @ $9 per hr.)		72.00
Factory overhead—fixed (8 hrs. @ $12 per hr.)		96.00
Total standard cost	$	440.00

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 59,000 units per quarter. The following flexible budget information is available.

	Operating Levels
		70%		80%		90%
Production in units		41,300		47,200		53,100
Standard direct labor hours		330,400		377,600		424,800
Budgeted overhead
Fixed factory overhead	$	4,531,200	$	4,531,200	$	4,531,200
Variable factory overhead	$	2,973,600	$	3,398,400	$	3,823,200

During the current quarter, the company operated at 90% of capacity and produced 53,100 units of product; actual direct labor totaled 420,800 hours. Units produced were assigned the following standard costs.

Direct materials (1,593,000 Ibs. @ $4.80 per Ib.)	$	7,646,400
Direct labor (424,800 hrs. @ $16 per hr.)		6,796,800
Factory overhead (424,800 hrs. @ $21 per hr.)		8,920,800
Total standard cost	$	23,364,000

Actual costs incurred during the current quarter follow.

Direct materials (1,582,000 Ibs. @ $5.90 per lb.)	$	9,333,800
Direct labor (420,800 hrs. @ $12.50 per hr.)		5,260,000
Fixed factory overhead costs		4,297,600
Variable factory overhead costs		4,023,200
Total actual costs	$	22,914,600

PART 1: Compute the variable overhead spending and efficiency variances. (Round "cost per unit" and "rate per hour" answers to 2 decimal places.)

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

	Actual Fixed OH Cost -1 Budgeted Overhead -1 Standard Cost (FOH applied) 0 2 -1 $0 0

PART 3:  Compute the total overhead controllable variance.

Answer 1

Solution 1:

Variable Overhead Cost Variance
Actual Cost				Standard cost for actual quantity				Standard Cost
AH*	AR =			AH*	SR =			SH *	SR =
420800	$9.56	$4,023,200.00		420800	$9.00	$3,787,200.00		424800	$9.00	$3,823,200.00
			$236,000 U				$36,000 F
			Variable overhead spending Variance				Variable overhead efficiency variance

Variable overhead spending variance = $236,000 U

Variable overhead efficiency variance = $36,000 F

Solution 2:

Budgeted fixed overhead = $4,531,200

Actual fixed overhead = $4,297,600

Fixed overhead applied = SH * Fixed overhead rate = 53100* 8 * $12 = $5,097,600

Fixed overhead spending variance = Budgeted fixed overhead -actual fixed overhead = $4,531,200 - $4,297,600 = $233,600 F

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = $5,097,600 - $4,531,200 = $566,400 F

Solution 3:

Overhead controllable variance = Variable overhead rate variance + Variable overhead efficiency variance + Fixed overhead spending variance

= $236,000 U + $36,000 F + $233,600 F = $33,600 F