Tuna Company set the following standard unit costs for its single product.
1. Compute the direct materials cost variance, including its price and quantity variances
Explanation: Direct Materials Variances
2. Compute the direct labor variance, including its rate and efficiency variances.
Direct Labor Variances
3. Compute the overhead controllable and volume variances.
Explanation: Overhead Variances
Direct materials (26 Ibs. @ $3 per Ib.)  $  78.00 
Direct labor (6 hrs. @ $6 per hr.)  36.00  
Factory overhead—variable (6 hrs. @ $4 per hr.)  24.00  
Factory overhead—fixed (6 hrs. @ $5 per hr.)  30.00  
  
Total standard cost  $  168.00 
  

The
predetermined overhead rate is based on a planned operating volume of
70% of the productive capacity of 40,000 units per quarter. The
following flexible budget information is available.

Operating Levels  
 
60%  70%  80%  
Production in units  24,000  28,000  32,000  
Standard direct labor hours  144,000  168,000  192,000  
Budgeted overhead  
Fixed factory overhead  $  840,000  $  840,000  $  840,000 
Variable factory overhead  $  576,000  $  672,000  $  768,000 

During
the current quarter, the company operated at 80% of capacity and
produced 32,000 units of product; actual direct labor totaled 186,000
hours. Units produced were assigned the following standard costs:

Direct materials (832,000 Ibs. @ $3 per Ib.)  $  2,496,000 
Direct labor (192,000 hrs. @ $6 per hr.)  1,152,000  
Factory overhead (192,000 hrs. @ $9 per hr.)  1,728,000  
  
Total standard cost  $  5,376,000 
  

Actual costs incurred during the current quarter follow: 
Direct materials (827,000 Ibs. @ $3.10)  $  2,563,700 
Direct labor (186,000 hrs. @ $5.75)  1,069,500  
Fixed factory overhead costs  1,649,434  
Variable factory overhead costs  1,544,151  
  
Total actual costs  $  6,826,785 
1. Compute the direct materials cost variance, including its price and quantity variances
Explanation: Direct Materials Variances
Direct materials cost variances  
Actual units at actual cost [827,000 lbs. @ $3.10]  $  2,563,700  
Standard units at standard cost [832,000 lbs. @ $3.00]  2,496,000  
  
Direct material cost variance  $  67,700  U 
  

Direct Materials Price and Quantity Variances  
Actual Cost AQ × AP  AQ × SP  Standard Cost SQ × SP  
827,000 × $3.10  827,000 × $3.00  832,000 × $3.00  
$2,563,700  $2,481,000  $2,496,000  
$82,700 U (Price variance)  $15,000 F (Quantity variance)  
$67,700 U (Total materials variance) 
2. Compute the direct labor variance, including its rate and efficiency variances.
Direct Labor Variances
Direct labor cost variances  
Actual units at actual cost [186,000 hrs. @ $5.75]  $  1,069,500  
Standard units at standard cost [192,000 hrs. @ $6.00]  1,152,000  
  
Direct labor cost variance  $  82,500  F 
  

Direct Labor Rate and Efficiency Variances  
Actual Cost AH × AR  AH × SR  Standard Cost SH × SR  
186,000 × $5.75  186,000 × $6.00  192,000 × $6.00  
$1,069,500  $1,116,000  $1,152,000  
$46,500 F (Rate variance)  $36,000 F (Efficiency variance)  
$82,500 F (Total labor variance) 
3. Compute the overhead controllable and volume variances.
Explanation: Overhead Variances
Controllable variance  
Actual overhead [$1,649,434 + $1,544,151]  $  3,193,585  
Applied overhead [from flexible budget, 80% capacity]  1,608,000  
  
Controllable variance  $  1,585,585  U 
  

Fixed overhead volume variance  
Budgeted fixed overhead [given, at 80% capacity]  $  840,000  
Fixed overhead cost applied [192,000 hrs. @ $5]  960,000  
  
Fixed overhead volume variance  $  120,000  F 
 