Question

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

Direct materials (3.0 Ibs. @ $5.00 per Ib.)	$	15.00
Direct labor (1.9 hrs. @ $12.00 per hr.)		22.80
Overhead (1.9 hrs. @ $18.50 per hr.)		35.15
Total standard cost	$	72.95

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		24,000
Depreciation—Machinery		72,000
Taxes and insurance		17,000
Supervision		279,250
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 (46,500 Ibs. @ $5.20 per lb.)				$	241,800
Direct labor (22,000 hrs. @ $12.10 per hr.)					266,200
Overhead costs
Indirect materials	$	41,700
Indirect labor		176,850
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		97,200
Taxes and insurance		15,300
Supervision		279,250			686,050
Total costs				$	1,194,050

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

Answer 1

		ANTUAN COMPANY
		Overhead Variance Report
		For Month Ended October 31
Expected production volume	75% of capacity
Production level achieved	75% of capacity
Volume variance	No variance
	Flexible Budget	Actual Results	Variances	Fav. / Unfav.
Variable costs
Indirect materials	15,000	41,700	26,700	Unfavorable
Indirect labor	75,000	176,850	101,850	Unfavorable
Power	15,000	17,250	2,250	Unfavorable
Repairs and maintenance	30,000	34,500	4,500	Unfavorable
Total variable costs	135000	270300	135,300	Unfavorable
Fixed costs
Depreciation—Building	24,000	24,000	0	No variance
Depreciation—Machinery	72,000	97,200	25,200	Unfavorable
Taxes and insurance	17,000	15,300	1,700	Favorable
Supervision	279,250	279,250	0	No variance
Total fixed costs	392250	415750	23,500	Unfavorable
Total overhead costs	527250	686050	158,800	Unfavorable