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.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter9: Standard Costing: A Functional-based Control Approach

Section: Chapter Questions

Problem 30P: Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following...

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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.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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