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V. Computation of materials, labor, and overhead variances Tuna Company set the following standard unit costs for its single product. Direct materials (25 lbs. @ $4 per lb.)………………………………….. $100.00 Direct labor (6 hrs. @ $8 per hr.)……………………………………….. 48.00 Factory overhead-variable (6 hrs. @ $5 per hr.)………………………... 30.00 Factory overhead-fixed (6 hrs. @ $7 per hr.)…………………………… 42.00 Total standard cost………………………………………………………. $220.00 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………………... 252,000 288,000 324,000 Budgeted overhead Fixed factory overhead…………… $2,016,000 $2,016,000 $2,016,000 Variable factory overhead…………$1,260,000 $1,440,000 $1,620,000 During the current quarter, the company operated at 70% of capacity and produced 42,000 units of product; actual direct labor totaled 250,000 hours. Units produced were assigned the following standard costs: Direct materials (1,050,000 lbs.@ $4 per lb.)………………………….. $4,200,000 Direct labor (252,000 hrs. @ $8 per hr.)……………………………….. 2,016,000 Factory overhead (252,000 hrs.@ $ 12 per hr.)………………………… 3,024,000 Total standard cost……………………………………………………….$9,240,000 Actual costs incurred during the current quarter follow: Direct materials (1,000,000 lbs. @ $4.25)……………………. $4,250,000 Direct labor (250,000 hrs. @ $7.75)………………………….. 1,937,500 Fixed factory overhead costs…………………………………. 1,960,000 Variable factory overhead costs……………………………… 1,200,000 Total actual costs……………………………………………... $9,347,500 3. Compute the overhead controllable and volume variances. 4. Compute the variable overhead spending and efficiency variance
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Answer
3)
Overhead Controllable and Volume Variance
At 70% Capacity Budgeted Variable overhead rate
=Variable Overhead/Direct Labor Hours
=$1,260,000 /252,000Hrs
=$5 Variable factory overhead rate...