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     Problem 21-4A Computing materials, labor, and overhead variances LO P3, P4 Required: 1. Compute the direct materials cost variance, including its price and quantity variances. 2. Compute the direct labor cost variance, including its rate and efficiency variances. 3. Compute the overhead controllable and volume variances.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
 

 

Problem 21-4A Computing materials, labor, and overhead variances LO P3, P4

Required:
1. Compute the direct materials cost variance, including its price and quantity variances.
2. Compute the direct labor cost variance, including its rate and efficiency variances.
3. Compute the overhead controllable and volume variances.

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