Question

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

Direct materials (5.0 Ibs. @ $5.00 per Ib.)	$	25.00
Direct labor (1.9 hrs. @ $10.00 per hr.)		19.00
Overhead (1.9 hrs. @ $18.50 per hr.)		35.15
Total standard cost	$	79.15

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		23,000
Depreciation—Machinery		70,000
Taxes and insurance		16,000
Supervision		283,250
Total fixed overhead costs					392,250
Total overhead costs				$	527,250

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (75,500 Ibs. @ $5.10 per lb.)				$	385,050
Direct labor (20,000 hrs. @ $10.20 per hr.)					204,000
Overhead costs
Indirect materials	$	41,550
Indirect labor		176,250
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		94,500
Taxes and insurance		14,400
Supervision		283,250			684,700
Total costs				$	1,273,750

5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead. ANTUAN COMPANY Overhead Variance Report For Month Ended October 31 Expected production volume Production level achieved Volume variance Flexible Budget Variable costs Results Variances Fay / Unfay Fixed costs Total overhead costs

Answer 1

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	41,550	26,550	Unfavorable
Indirect labor	75,000	176,250	101,250	Unfavorable
Power	15,000	17,250	2,250	Unfavorable
Repairs and maintenance	30,000	34,500	4,500	Unfavorable
Total variable costs	135000	269550	134,550	Unfavorable
Fixed costs
Depreciation—Building	23,000	23,000	0	No variance
Depreciation—Machinery	70,000	94,500	24,500	Unfavorable
Taxes and insurance	16,000	14,400	1,600	Favorable
Supervision	283,250	283,250	0	No variance
Total fixed costs	392250	415150	22,900	Unfavorable
Total overhead costs	527250	684700	157,450	Unfavorable