rico Company set the following standard unit costs for its single product. Direct materials (30 lbs. @ $4 per lb.) $120 Direct labor (5 hrs. @ $14 per hr.) 70 Factory overhead—variable (5 hrs. @ $8 per hr.)   40 Factory overhead—fixed (5 hrs. @ $10 per hr.)   60 Total standard cost $280 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 Level Operating Level Operating Level   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 OH $2,400,000 $2,400,000 $2,400,000 Variable factory OH $1,68,000 $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 total 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 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 Required Compute the direct materials cost variance, including its price and quantity varianc

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 lbs. @ $4 per lb.)

$120

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

70

Factory overhead—variable (5 hrs. @ $8 per hr.)

 

40

Factory overhead—fixed (5 hrs. @ $10 per hr.)

 

60

Total standard cost

$280



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 Level

Operating Level

Operating Level

 

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 OH

$2,400,000

$2,400,000

$2,400,000

Variable factory OH

$1,68,000

$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 total 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 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

Required

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

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