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 (1.8 hrs. @ $11.00 per hr.) 19.80 Overhead (1.8 hrs. @ $18.50 per hr.) 33.30 Total standard cost $ 68.10 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 $ 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 251,500 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 (46,500 Ibs. @ $5.20 per lb.) $ 241,800 Direct labor (21,000 hrs. @ $11.20 per hr.) 235,200 Overhead costs Indirect materials $ 41,500 Indirect labor 176,900 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 24,000 Depreciation—Machinery 95,850 Taxes and insurance 16,200 Supervision 251,500 657,700 Total costs $ 1,134,700 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

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 overhead 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 overhead costs	9.00		117000	135000	153000
Fixed overhead costs
Depreciation—Building		24,000	24,000	24,000	24,000
Depreciation—Machinery		71,000	71,000	71,000	71,000
Taxes and insurance		18,000	18,000	18,000	18,000
Supervision		251,500	251,500	251,500	251,500
Total fixed overhead costs		364500	364500	364500	364500
Total overhead costs			481500	499500	517500