Question

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 25,000 Depreciation—Machinery 70,000 Taxes and insurance 17,000 Supervision 308,000 Total fixed overhead costs 420,000 Total overhead costs $ 555,000

The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (46,000 Ibs. @ $4.20 per lb.) $ 193,200 Direct labor (22,000 hrs. @ $14.30 per hr.) 314,600 Overhead costs Indirect materials $ 41,900 Indirect labor 176,650 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 25,000 Depreciation—Machinery 94,500 Taxes and insurance 15,300 Supervision 308,000 713,100 Total costs $ 1,220,900 rev: 03_28_2018_QC_CS-122864

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.Required information [The following information applies to the questions displayed below.] Antuan Company set the following standard costs for one unit of its product. Direct materials (3.0 Ibs. @ $4.00 per Ib.) $ 12.00 Direct labor (2.0 hrs. @ $14.00 per hr.) 28.00 Overhead (2.0 hrs. @ $18.50 per hr.) 37.00 Total standard cost $ 77.00

Answer 1

Part 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) 13,000 15,000 17,000 Variable costs Indirect materials $1.00 13,000 15,000 17,000 Indirect labor 5.00 65,000 75,000 85,000 Power 1.00 13,000 15,000 17,000 Repairs and maintenance 2.00 26,000 30,000 34,000 Total variable costs $9.00 117,000 135,000 153,000 Fixed costs Depreciation—Building $25,000 25,000 25,000 25,000 Depreciation—Machinery 70,000 70,000 70,000 70,000 Taxes and insurance 17,000 17,000 17,000 17,000 Supervision 308,000 308,000 308,000 308,000 Total fixed costs $420,000 420,000 420,000 420,000 Total overhead costs $537,000 $555,000 $573,000

Part 3

	Actual Cost Standard Cost AQ x AP AQ x SP SQ x SP 46,000 x $4.20 46,000 x $4.00 45,000 (15000*3) x $4.00 $193200 $184,000 $180,000 $9,200 $4,000 Direct materials price variance $9,200 Unfavorable Direct materials quantity variance 4,000 Unfavorable Total direct materials variance $13,200 Unfavorable

Part 4

Actual Cost Standard Cost AH x AR AH x SR SH x SR 22,000 x $14.30 22,000 x $14.00 30000 (15000*2) x $14.00 $314,600 $308000 $420,000 $6,600 $112,000 Direct labor rate variance $6,600 Unfavorable Direct labor efficiency variance 112,000 Favorable Total direct labor variance $105,400 Favorable

Part 5

ANTUAN COMPANY 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 Budget Actual Results Variances Fav. / Unfav. Variable costs Indirect materials $15,000 $41,900 $26,900 Unfavorable Indirect labor 75,000 176,650 101,650 Unfavorable Power 15,000 17,250 2250 Unfavorable Repairs and maintenance 30,000 34,500 4500 Unfavorable Total variable costs 135,000 270,300 135,300 Unfavorable Fixed costs Depreciation—Building 25,000 25,000 No variance Depreciation—Machinery 70,000 94,500 24,500 Favorable Taxes and insurance 17,000 15,300 1,700 Unfavorable Supervision 308,000 308,000 No variance Total fixed costs 420,000 442,800 22,800 Unfavorable Total overhead costs $555,000 $713,100 $158,100 Unfavorable