Question

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 (2.0 hrs. @ $12.00 per hr.)		24.00
Overhead (2.0 hrs. @ $18.50 per hr.)		37.00
Total standard cost	$	77.00

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.

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 (2.0 hrs. @ $12.00 per hr.)		24.00
Overhead (2.0 hrs. @ $18.50 per hr.)		37.00
Total standard cost	$	77.00

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.

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		25,000
Depreciation—Machinery		70,000
Taxes and insurance		17,000
Supervision		308,000
Total fixed overhead costs					420,000
Total overhead costs				$	555,000

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. @ $12.10 per hr.)					266,200
Overhead costs
Indirect materials	$	41,950
Indirect labor		176,700
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		25,000
Depreciation—Machinery		94,500
Taxes and insurance		15,300
Supervision		308,000			713,200
Total costs				$	1,231,550

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

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.rev: 03_28_2018_QC_CS-122864

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 $1.00 13,000 15,000 17,000 Indirect labor 5.00 65,000 75,000 85,000 Power 1.00 13,000 15,000 17,000 2.00 26,000 30,000 34,000 Total variable costs $9.00 117,000 135,000 153,000 Fixed overhead costs Depreciation—Building $25,000 25,000 25,000 25,000 Depreciation—Machinery 70,000 70,000 70,000 70,000 Taxes and insurance 17,000 17,000 17,000 17,000 Supervision 308,000 308,000 308,000 308,000 420,000 420,000 420,000 420,000 Total overhead costs $37,000 $555,000 $573,000

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
	Actual Cost 0 0 Standard Cost AQ x SQ x x 0 x $0 0 $0 $0 0

Answer 1

Solution 1&2:

Antuan company
Flexible Overhead Budget
For month ended Oct 31
Particulars	Flexible Budget		Flexible Budget for
	Variable amount per unit	Total fixed cost	65% of capacity	75% of capacity	85% of capacity
Sales (In units)			13000	15000	17000
Variable overhead costs:
Indirect materials	$1.00		$13,000.00	$15,000.00	$17,000.00
Indirect labor	$5.00		$65,000.00	$75,000.00	$85,000.00
Power	$1.00		$13,000.00	$15,000.00	$17,000.00
Repairs and maintenance	$2.00		$26,000.00	$30,000.00	$34,000.00
Total variable costs	$9.00		$117,000.00	$135,000.00	$153,000.00
Fixed overhead costs:
Depreciation - Building		$25,000.00	$25,000.00	$25,000.00	$25,000.00
Depreciation - Machinery		$70,000.00	$70,000.00	$70,000.00	$70,000.00
Taxes and Insurance		$17,000.00	$17,000.00	$17,000.00	$17,000.00
Supervision		$308,000.00	$308,000.00	$308,000.00	$308,000.00
Total fixed costs		$420,000.00	$420,000.00	$420,000.00	$420,000.00
Total overhead costs			$537,000.00	$555,000.00	$573,000.00

Solution 3:

Direct Material Cost Variance
Actual Cost				Standard cost for actual quantity				Standard Cost
AQ *	AP =			AQ *	SP =			SQ *	SP =
61500	$4.10	$252,150.00		61500	$4.00	$246,000.00		60000	$4.00	$240,000.00
			$6,150 U				$6,000 U
			Direct Material Price Variance				Direct Material Qty variance

Direct material price variance = $6,150 U

Direct material quantity variance = $6,000 U