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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 (1.8 hrs. @ $13.00 per hr.)		23.40
Overhead (1.8 hrs. @ $18.50 per hr.)		33.30
Total standard cost	$	76.70

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		71,000
Taxes and insurance		16,000
Supervision		253,500
Total fixed overhead costs					364,500
Total overhead costs				$	499,500

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

Direct materials (61,000 Ibs. @ $5.10 per lb.)				$	311,100
Direct labor (22,000 hrs. @ $13.20 per hr.)					290,400
Overhead costs
Indirect materials	$	41,900
Indirect labor		176,350
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		95,850
Taxes and insurance		14,400
Supervision		253,500			657,750
Total costs				$	1,259,250

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.

Problem 21-3A Part 3

3. Compute the direct materials cost variance, including its price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.)

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.)

Problem 21-3A Part 5

5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.)

Answer 1

[1&2] 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]			13000	15000	17000
Variable Overhead Costs
Indirect materials	100		13000	15000	17000
Indirect labour	500		65000	75000	85000
Power	100		13000	15000	17000
Repair and maintenance	200		26000	30000	34000
Total variable costs	900		117000	135000	153000
Fixed Overhead Costs
Depreciation-building		24000	24000	24000	24000
Depreciation-machinery		71000	71000	71000	71000
Taxes and insurance		16000	16000	16000	16000
Supervision		253500	253500	253500	253500
Total fixed costs		364500	364500	364500	364500
Total overhead costs			247500	229500	211500

[3] Actual Cost Standard Cost

AQ into AP AQ into SP SQ into SP   

61000 into 510 61000 into 500 60000 into 500

311100 305000 300000

6100 5000

Direct materials price variance 6100 Unfavorable

Direct materials quantity variance 5000 Unfavorable

Total direct materials variance 11100 Unfavorable

[4] Actual Cost Standard Cost

AH into AR AH into SR SH into SR

22000 into 1320 22000 into 1300 20000 into 1300

290400 286000 260000

4400 26000

Direct labour rate variance 4400 Unfavorable

Direct labour efficiency variance 26000 Unfavorable

Total direct labour variance 30400 Unfavorable

[5] 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 budgets	Actual results	Variances	Favorable/Unfavorable
Variable costs
Indirect materials	15000	41900	26900	Favorable
Indirect labour	75000	176350	101350	Favorable
Power	15000	17250	2250	Favorable
Repair and maintenance	30000	34500	4500	Unfavorable
Total variable costs	135000	270000	135000	Unfavorable
Fixed costs
Depreciation- building	24000	24000	-	No variance
Depreciation-machinery	71000	71000	24850	Favorable
Taxes and insurance	16000	16000	1600	Favorable
Supervision	253500	253500	-	No variance
Total fixed costs	364500	364500	26450	Unfavorable
Total overhead costs	229500	94500	108550	Unfavorable