Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $5.00 per Ib.) Direct labor (1.6 hrs. @ $13.00 per hr.) Overhead (1.6 hrs. @ $18.50 per hr.) Total standard cost $20.00 20.80 29.60 $ 70.40 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 196,000 Total fixed overhead costs Total overhead costs $135,000 309,000 $444,000 The company incurred the following actual costs when it operated at 75% of capacity in October. $ 313,650 292,600 Direct materials (61,500 Ibs. @ $5.10 per lb.) Direct labor (22,000 hrs. @ $13.30 per hr.) Overhead costs Indirect materials Indirect labor Power Repairs and maintenance Depreciation Building Depreciation-Machinery Taxes and insurance Supervision Total costs $ 41,750 176,750 17,250 34,500 24,000 95,850 16,200 196,000 602,300 $1,208,550

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 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		196,000	196,000	196,000	196,000
Total fixed costs		309000	309000	309000	309000
Total overhead costs			426000	444000	462000

3
Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
61,500	x	5.10		61,500	x	$5.00		60,000	x	$5.00
	313650				307500				300000
			6150				7500
Direct materials price variance				6150	Unfavorable
Direct materials quantity variance				7500	Unfavorable
Total direct materials variance				13650	Unfavorable
4
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
22,000	x	$13.30		22,000	x	$13.00		24,000	x	$13.00
	292600				286000				312000
			6600				26000
Direct labor rate variance				6600	Unfavorable
Direct labor efficiency variance				26000	Favorable
Total direct labor variance				19400	Favorable

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	41,750	26,750	Unfavorable
Indirect labor	75,000	176,750	101,750	Unfavorable
Power	15,000	17,250	2,250	Unfavorable
Repairs and maintenance	30,000	34,500	4,500	Unfavorable
Total variable costs	135000	270250	135,250	Unfavorable
Fixed costs
Depreciation—Building	24,000	24,000	0	No variance
Depreciation—Machinery	71,000	95,850	24,850	Unfavorable
Taxes and insurance	18,000	16,200	1,800	Favorable
Supervision	196,000	196,000	0	No variance
Total fixed costs	309000	332050	23,050	Unfavorable
Total overhead costs	444000	602300	158,300	Unfavorable