Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (3.0 Ibs. @ $5.00 per Ib.) Direct labor (1.6 hrs. @ $11.00 per hr.) Overhead (1.6 hrs. e $18.50 per hr.) Total standard cost $15.00 17.60 29.60 $62.20 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 coats Pixed overhead costs Depreciation-Building 24,000 Depreciation Machinery 71.000 Taxes and insurance 17,000 Supervision 197,000 Total fixed overhead coats Total overhead costs $135 309,000 $444,000

Answer 1

Direct labor rate variance = Actual hours * (Standard rate - Actual rate)

= 24,000 * ($11 - $11.1)

= $2,400 Unfavorable

Direct labor efficiency variance = Standard rate * (Standard hours - Actual hours)

= $11 * [(20,000*75%*1.6) - 24,000]

= $0

Total direct labor variance = Direct labor rate variance + Direct labor efficiency variance

= $2,400 Unfavorable + $0

= $2,400 Unfavorable