Reference no: EM131820640
Question - 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
Required -
Compute the overhead controllable and volume variances.
Compute the variable overhead spending and efficiency variance.