Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (3.0 Ibs. @ $6.00 per Ib.) $18.00 Direct labor (1.8 hrs. @ $11.00 per hr.) 19.80 Overhead (1.8 hrs. @ $18.50 per hr.) 33.30 Total standard cost $71.10 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 Fixed overhead costs Depreciation-Building 24,000 Depreciation-Machinery 71,000 Taxes and insurance 18,000 Supervision 251,500 Total fixed overhead costs Total overhead costs $135,000 364,500 $499,500 The company incurred the following actual costs when it operated at 75% of capacity in October. $ 285,200 216,600 Direct materials (46,000 Ibs. @ $6.20 per lb.) Direct labor (19,000 hrs. @ $11.40 per hr.) Overhead costs Indirect materials $ 41,850 Indirect labor 176,550 Power 17,250 Repairs and maintenance 34,500 Depreciation-Building 24,000 Depreciation-Machinery 95,850 Taxes and insurance 16,200 Supervision 251,500 Total costs 657,700 $1,159,500 Required: &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

Answer -

1&2. Answer -

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)			13000	15000	17000
Variable overhead costs :
Indirect materials	$1		$13000	$15000	$17000
Indirect labor	$5		$65000	$75000	$85000
Power	$1		$13000	$15000	$17000
Repairs and maintenance	$2		$26000	$30000	$34000
Total variable costs	$9		$117000	$135000	$153000
Fixed overhead costs :
Depreciation-Building		$24000	$24000	$24000	$24000
Depreciation-Machinery		$71000	$71000	$71000	$71000
Taxes and insurance		$18000	$18000	$18000	$18000
Supervision		$251500	$251500	$251500	$251500
Total fixed costs		$364500	$364500	$364500	$364500
Total overhead cost			$481500	$499500	$517500

3. Answer -

AQ = Actual quantity

SQ = Standard quantity

AP = Actual price

SP = Standard price

Actual cost								Standard cost
AQ	*	AP		AQ	*	SP		SQ	*	SP
46000	*	$6.20		46000	*	$6		45000	*	$6
	$285200				$276000				$270000
			$9200				$6000

Direct materials price variance	$9200	Unfavorable
Direct materials quantity variance	$6000	Unfavorable
Total direct materials variance	$15200	Unfavorable

4. Answer -

Actual cost								Standard cost
AH	*	AR		AH	*	SR		SH	*	SR
19000	*	$11.40		19000	*	$11		27000	*	$11
	$216600				$209000				$297000
			$7600				$88000

Direct labor rate variance	$7600	Unfavorable
Direct labor efficiency variance	$88000	Favorable
Total direct labor variance	$80400	Favorable

5. Answer -

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	$15000	$41850	$26850	Unfavorable
Indirect labor	$75000	$176550	$101550	Unfavorable
Power	$15000	$17250	$2250	Unfavorable
Repairs and maintenance	$30000	$34500	$4500	Unfavorable
Total variable costs	$135000	$270150	$135150	Unfavorable
Fixed costs :
Depreciation-Building	$24000	$24000	$0	No variance
Depreciation-Machinery	$71000	$95850	$24850	Unfavorable
Taxes and insurance	$18000	$16200	$1800	Favorable
Supervision	$251500	$251500	$0	No variance
Total fixed costs	$364500	$387550	$23050	Unfavorable
Total overhead costs	$499500	$657700	$158200	Unfavorable