Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $6.00 per Ib.) $ 24.00 Direct labor (1.8 hrs. @ $11.00 per hr.) 19.80 Overhead (1.8 hrs. @ $18.50 per hr.) 33.30 Total standard cost $ 77.10 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 $ 30,000 Indirect labor 75,000 Power 30,000 Repairs and maintenance 30,000 Total variable overhead costs $ 165,000 Fixed overhead costs Depreciation—Building 23,000 Depreciation—Machinery 71,000 Taxes and insurance 17,000 Supervision 223,500 Total fixed overhead costs 334,500 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. @ $6.10 per lb.) $ 372,100 Direct labor (28,000 hrs. @ $11.40 per hr.) 319,200 Overhead costs Indirect materials $ 41,250 Indirect labor 176,650 Power 34,500 Repairs and maintenance 34,500 Depreciation—Building 23,000 Depreciation—Machinery 95,850 Taxes and insurance 15,300 Supervision 223,500 644,550 Total costs $ 1,335,850 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