Question

Problem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, C2 [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. @ $5.00 per Ib.) Direct labor (1.7 hrs. @ $14.00 per hr.) Overhead (1.7 hrs. @ $18.50 per hr.) Total standard cost $15.00 23.80 31.45 $70.25 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. $135,000 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 Fixed overhead costs Depreciation-Building 25,000 Depreciation-Machinery 71,000 Taxes and insurance 18,000 Supervision 222,750 Total fixed overhead costs Total overhead costs 336,750 $471,750

Answer 1

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	41,300	26,300	Unfavorable
Indirect labor	75,000	176,850	101,850	Unfavorable
Power	15,000	17,250	2,250	Unfavorable
Repairs and maintenance	30,000	34,500	4,500	Unfavorable
Total variable costs	135000	269900	134,900	Unfavorable
Fixed costs
Depreciation—Building	25,000	25,000	0	No variance
Depreciation—Machinery	71,000	95,850	24,850	Unfavorable
Taxes and insurance	18,000	16,200	1,800	Favorable
Supervision	222,750	222,750	0	No variance
Total fixed costs	336750	359800	23,050	Unfavorable
Total overhead costs	471750	629700	157,950	Unfavorable