Question

Required information Problem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, C2 [The following information applies to the questions displayed below.] Antuan Company set the following standard costs for one unit of its product. Direct materials (6 Ibs. @ $5 per Ib.) $ 30 Direct labor (2 hrs. @ $17 per hr.) 34 Overhead (2 hrs. @ $18.50 per hr.) 37 Total standard cost $ 101 The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) Variable overhead costs Indirect materials $ 45,000 Indirect labor 180,000 Power 45,000 Repairs and maintenance 90,000 Total variable overhead costs $ 360,000 Fixed overhead costs Depreciation—Building 24,000 Depreciation—Machinery 80,000 Taxes and insurance 12,000 Supervision 79,000 Total fixed overhead costs 195,000 Total overhead costs $ 555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (91,000 Ibs. @ $5.10 per lb.) $ 464,100 Direct labor (30,500 hrs. @ $17.25 per hr.) 526,125 Overhead costs Indirect materials $ 44,250 Indirect labor 177,750 Power 43,000 Repairs and maintenance 96,000 Depreciation—Building 24,000 Depreciation—Machinery 75,000 Taxes and insurance 11,500 Supervision 89,000 560,500 Total costs $ 1,550,725 Problem 21-3A Part 1&2 Required: 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.

Answer 1

ANTUAN COMPANY
Flexible Overhead Budgets
For Month Ended October 31
	Flexible Budget		Flexible Budget for
	Variable Amount per Unit	Total Fixed Cost	65% of capacity	75% of capacity	85% of capacity
Sales (in units)			13,000	15,000	17,000
Variable overhead costs
Indirect materials	3.00		39,000	45,000	51,000
Indirect labor	12.00		156,000	180,000	204,000
Power	3.00		39,000	45,000	51,000
Repairs and maintenance	6.00		78,000	90,000	102,000
Total variable overhead costs	24.00		312000	360000	408000
Fixed overhead costs
Depreciation—Building		24,000	24,000	24,000	24,000
Depreciation—Machinery		80,000	80,000	80,000	80,000
Taxes and insurance		12,000	12,000	12,000	12,000
Supervision		79,000	79,000	79,000	79,000
Total fixed overhead costs		195000	195000	195000	195000
Total overhead costs			507000	555000	603000