The following Information appliles to the questions displayed below Trico Compan

Question

The following Information appliles to the questions displayed below Trico Company set the following standard unit costs for its single product. Direct materials (26 lbs.@ $4 per lb.) Direct labor (8 hrs. $8 per hr.) Factory overhead-variable (8 hrs.@$5 per hr.) Factory overhead-fixed (8 hrs. @ $7 per hr.) $104.00 64.00 40.00 56.00 Total standard cost $264.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 40,000 units per quarter. The following flexible budget information is available Operating Levels 70% 28,000 224,000 80% 32,000 256,000 90% Production in units Standard direct labor hours Budgeted overhead 36,000 288,000 Fixed factory overhead Variable factory $ 1.792.000 $. 1.792.000 $. 1.792.000 $1.120,000 1,280,000 1.440,000 During the current quarter, the company operated at 90% of capacity and produced 36,000 units of product actual direct labor totaled 280,000 hours. Units produced were assigned the following standard costs: Direct materials (936,000 lbs.@$4 per lb.) Direct labor (288,000 hrs.@$8 per hr) Factory overhead (288,000 hrs. $12 per hr.) $ 3,744,000 2,304,000 3,456,000 Total stanclard cost $9,504,000 Actual costs incurred during the current quarter follow: $3.817100 Direct materials (931,000 lbs. $4.10 per lb.) Direct labor (280,000 hrs.@$775 per hr.) Fixed factory overhead costs 2.170,000 2.483.019 2,324,528 Variable factory overhead costs Total actual costs $10,794,647

Explanation / Answer

Part - A

Material Variance

Where,

SQ = Standard Quantity, SP = Standard Price, AQ=Actual Quantity , AP = Actual Price

Material Cost Variance = 1-2

= 3744000-3817100

= 73,100 Adverse

Material Price Variance = 3-2

=3724000-3817100

=93,100 Adverse

Material Quantity Variance =1-3

=3744000-3724000

=20,000 Favouable

Part - B

Direct Labour Variance

Where,

SH = Standard Hours, SR = Standard Rate, AH = Actual hour, AR = Actual Rate

Direct Labour Variance = 1-2

=2304000-2170000

=134,000 Favourable

Labour Rate Variance = 3-2

=2240000-2170000

=70,000 Favouable

Labour Efficiency Variance = 1-3

=2304000-2240000

=64,000 Favouable

Part - C

Variable Overhead Variance

Variable Overhead Volume Variance = Budgeted Overhead - Actual Overhead

= 1,440,000-2,324,528

=884,528 Adverse

Part - D

Fixed Overhead Volume Variance

Volume Variance = Budgeted Fixed overhead - Actual Fixed Overhead

=1,792,000-2483019

=691,019 Adverse

(1) (2) (3) Standard Actual SQ*SP AQ*AP AO*SP 936000*4 931000*4.10 931000*4 3,744,000 3,817,100 3,724,000

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