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Antuan Company set the following standard costs for one unit of its product.

Direct materials (4.0 Ibs. @ $4.00 per Ib.)	$	16.00
Direct labor (1.9 hrs. @ $12.00 per hr.)		22.80
Overhead (1.9 hrs. @ $18.50 per hr.)		35.15
Total standard cost	$	73.95

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	$	15,000
Indirect labor		75,000
Power		15,000
Repairs and maintenance		30,000
Total variable overhead costs				$	135,000
Fixed overhead costs
Depreciation—Building		23,000
Depreciation—Machinery		70,000
Taxes and insurance		16,000
Supervision		283,250
Total fixed overhead costs					392,250
Total overhead costs				$	527,250

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (61,500 Ibs. @ $4.10 per lb.)				$	252,150
Direct labor (22,000 hrs. @ $12.40 per hr.)					272,800
Overhead costs
Indirect materials	$	41,250
Indirect labor		176,250
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		94,500
Taxes and insurance		14,400
Supervision		283,250			684,400
Total costs				$	1,209,350

rev: 03_28_2018_QC_CS-122864

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.

3. Compute the direct materials cost variance, including its price and quantity variances.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
4. Compute the direct labor cost variance, including its rate and efficiency variances.

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.

Answer 1

			Flexible overhead Budget
			For the month oct 31
			Flexible budget		Flexible Budget for
			Variable	total	65% of	75% of	85% of
			amt pu	fixed cost	capacity	capacity	capacity
Sales in (units)					13000	15000	17000
Variable Costs
Indirect materials			1		13000	15000	17000
Indirect labor			5		65000	75000	85000
Power			1		13000	15000	17000
Repairs & Maintenance			2		26000	30000	34000
total variable costs					117000	135000	153000
Fixed costs
Depreciation-Building				23,000	23,000	23,000	23,000
Depreciation-Machinery				70,000	70,000	70,000	70,000
Taxes and insurance				16,000	16,000	16,000	16,000
Supervision				283,250	283,250	283,250	283,250
total fixed costs				392,250	392,250	392,250	392,250
total overhead costs					509,250	527,250	545,250

Actual cost								Standard cost
AQ	*	AP		AQ	*	SR		SQ	*	SR
61500	*	4.1		61500	*	4		60000	*	4
	252,150				246000				240000
			6,150				6000
direct materials price variance				6,150	U
direct materials quantity variance				6,000	U
total direct materials variance				12,150	U

Actual cost								Standard cost
AH	*	AR		AH	*	SR		SH	*	SR
22000	*	12.4		22000	*	12		28500	*	12
	272,800				264000				342000
			8,800				78000
Direct labor rate variance				8,800	U
Direct labor Efficiency variance				78,000	F
total direct labor variance				69,200	F

		Overhead Variance Report
Expected production volume			75% of capacity
production level achieved			75% of capacity
Volume variance			No variance
			Flexible	Actual	Variances	Fav/unfav
			budget	results
Variable Costs
Indirect materials			15,000	41,250	26,250	U
Indirect labor			75,000	176,250	101,250	U
Power			15,000	17,250	2,250	U
Repairs & Maintenance			30,000	34,500	4,500	U
total variable costs			135,000	269,250	134,250	U
Fixed costs
Depreciation-Building			23,000	23,000	0	N
Depreciation-Machinery			70,000	94,500	24,500	U
Taxes and insurance			16,000	14,400	1,600	F
Supervision			283,250	283,250	0	N
total fixed costs			392,250	415,150	22,900	U
total overhead costs			527,250	684,400	157,150	U