Question

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

Direct materials (3.0 Ibs. @ $5.00 per Ib.)	$	15.00
Direct labor (1.6 hrs. @ $12.00 per hr.)		19.20
Overhead (1.6 hrs. @ $18.50 per hr.)		29.60
Total standard cost	$	63.80

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		18,000
Supervision		196,000
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 (46,000 Ibs. @ $5.10 per lb.)				$	234,600
Direct labor (28,000 hrs. @ $12.20 per hr.)					341,600
Overhead costs
Indirect materials	$	41,800
Indirect labor		176,600
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		95,850
Taxes and insurance		16,200
Supervision		196,000			602,200
Total costs				$	1,178,400

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.
3. Compute the direct materials cost variance, including its price and quantity variances.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
4. Compute the direct labor cost variance, including its rate and efficiency variances.

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.

Answer 1

As per policy, only four parts of a question is allowed to answer at a time, so answering 4 parts:

1&2)
Flexible Overhead Budgets :
Operating capacity	65%	75%	85%
Variable overhead costs
Ind Materials (at 75%*65/75)	13000	15000	17000
Ind labor	65000	75000	85000
Power	13000	15000	17000
Repair and maint	26000	30000	34000
Total Variable overhead costs	117000	135000	153000
Fixed Overhead Costs:
Dep building	24000	24000	24000
Dep machinery	71000	71000	71000
Taxes and Insu	18000	18000	18000
Supervision	196000	196000	196000
Total Fixed Overhead Costs	309000	309000	309000
Total Overhead Costs	426000	444000	462000

3)
Direct Material Price Variance= (Actual price - Budgeted price)* Actual used
(5.1 - 5)*46000	4600	U
Direct Material Quanti Variance= (Budgeted quantity for actual units - Actual used)* Budgeted price
[(15000*3) -46000)]*5	5000	U
4)
Direct Labor rate Variance= (Actual rate - Budgeted rate)* Actual labor hours
(12.20 - 12)*28000	5600	U
Direct Labor Efficiency Variance= (Budgeted labor hours for actual units - Actual hours)* Budgeted rate
[(15000*1.6) -28000)]*12	48000	U