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Problem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, P4

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

Direct materials (4.0 Ibs. @ $5.00 per Ib.)	$	20.00
Direct labor (1.6 hrs. @ $11.00 per hr.)		17.60
Overhead (1.6 hrs. @ $18.50 per hr.)		29.60
Total standard cost	$	67.20

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		70,000
Taxes and insurance		17,000
Supervision		198,000
Total fixed overhead costs					309,000
Total overhead costs				$	444,000

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

Direct materials (60,500 Ibs. @ $5.20 per lb.)				$	314,600
Direct labor (23,000 hrs. @ $11.10 per hr.)					255,300
Overhead costs
Indirect materials	$	41,500
Indirect labor		177,000
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		94,500
Taxes and insurance		15,300
Supervision		198,000			602,050
Total costs				$	1,171,950

rev: 04_27_2020_QC_CS-209738

Problem 21-3A Part 4

4. Compute the direct labor cost variance, including its rate and efficiency variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance. Round "Rate per hour" answers to two decimal places.)

Answer 1

Req 4	Actual Cost		Flexible Budget		Standard Cost
	AH	x	AR		AH	x	SR		SH	x	SR
	23000	x	11.1		23000	x	11		24000	x	11
		255300				253000				264000
				2,300				11,000
	Direct labor rate Variance		2,300	Unfavourable
	Direct labor efficiency Variance	11,000	Favorable
	Total labor variance		8,700	Favorable