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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 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