accounting 2 homework

COMPUTATION OF MATERIALS, LABOR, AND OVERHEAD VARIEANCES

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

Direct materials (30lbs. @ $4 per lb.)…………………… $120.00

Direct labor (5hrs. @ $14 per hr.)…………………………. 70.00

Factory overhead- variable (5hrs. @ $8 per hr.)…… 40.00

Factory overhead- fixed (5hrs. @ $10 per hr.)……… 50.00

Total Standard cost……………………………………………… $280.00

The predetermined overhead rate is based on the 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 lbs. @ $4 per lb.)………………… $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 lbs. @ $4.10)……………………..$ 6,621,500

Direct labor (265,000 hrs. @ $13.75)……………………………. 3,643,750

Fixed factory overhead costs ………………………………………. 2,350,000

Variable factory overhead costs…………………………………… 2,200,000

Total actual costs………………………………………………………….$14,815,250

REQUIRED

1. Compute the direct materials cost variance, including its price and quantity variances.

2. Compute the direct labor variance, including its rate and efficiency variances.

3. Compute the overhead controllable and volume variances.