Question

Problem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, C2

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

Direct materials (6 Ibs. @ $5 per Ib.)	$	30
Direct labor (2 hrs. @ $17 per hr.)		34
Overhead (2 hrs. @ $18.50 per hr.)		37
Total standard cost	$	101

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	$	45,000
Indirect labor		180,000
Power		45,000
Repairs and maintenance		90,000
Total variable overhead costs				$	360,000
Fixed overhead costs
Depreciation—Building		24,000
Depreciation—Machinery		80,000
Taxes and insurance		12,000
Supervision		79,000
Total fixed overhead costs					195,000
Total overhead costs				$	555,000

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

Direct materials (91,000 Ibs. @ $5.10 per lb.)				$	464,100
Direct labor (30,500 hrs. @ $17.25 per hr.)					526,125
Overhead costs
Indirect materials	$	44,250
Indirect labor		177,750
Power		43,000
Repairs and maintenance		96,000
Depreciation—Building		24,000
Depreciation—Machinery		75,000
Taxes and insurance		11,500
Supervision		89,000			560,500
Total costs				$	1,550,725

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.

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)			not attempted	not attempted	not attempted
Variable overhead costs
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	$0.00		0	0	0
Fixed overhead costs
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
not attempted		$0	$0	$0	$0
Total overhead costs			not attempted	not attempted

Answer 1

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 (20,000 ×65%)	15,000 (20,000 ×75%)	17,000 (20,000 ×85%)
Variable costs:
Indirect Materials	$3 ($45,000/15,000)		$39,000 (13,000 × $3)	$45,000 (15,000 ×$3)	$51,000 (17,000 ×$3)
Indirect Labor	$12 ($180,000/15,000)		$156,000 (13,000 ×$12)	$180,000 (15,000 ×$12)	$204,000 (17,000 ×$12)
Power	$3 ($45,000/15,000)		$39,000 (13,000 × $3)	$45,000 (15,000 × $3)	$51,000 (17,000 ×$3)
Repairs and Maintenance	$6 ($90,000/15,000)		$78,000 (13,000 ×$6)	$90,000 (15,000 × $6)	$102,000 (17,000 × $6)
Total Variable costs (A)	$24		$312,000	$360,000	$408,000
Fixed costs
Depreciation- Building		$24,000	$24,000	$24,000	$24,000
Depreciation- Machinery		$80,000	$80,000	$80,000	$80,000
Taxes and Insurance		$12,000	$12,000	$12,000	$12,000
Supervision		$79,000	$79,000	$79,000	$79,000
Total Fixed costs (B)		$195,000	$195,000	$195,000	$195,000
Total Overhead costs (A + B)			$507,000	$555,000	$603,000