Tuna Company set the following standard unit costs for its single product.
|
Direct materials (25 Ibs @ $4 per Ib) |
$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 Ibs @ $4 per Ib) |
$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 Ibs @ $425) |
$4,250,000 |
|
Direct labor (250,000 hrs @ $775) |
1,937,500 |
|
Fixed factory overhead costs |
1,960,000 |
|
Variable factory overhead costs |
1,200,000 |
|
Total actual costs |
$9,347,500 |
2. Refer to information in Problem 24 1A.
Required
Compute these variances: (a) variable overhead spending and efficiency, (b) fixed overhead spending and volume, and (c) total overhead controllable.