Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (6 lbs. @ $5 per Ib.) Direct labor (2 hrs. $17 per hr.) Overhead (2 hrs. $18.50 per hr.) Total standard cost $ 30 34 37 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 $ 45,000 Indirect labor 180,000 Power 45,000 Repairs and maintenance 90,000 Total variable overhead costs Fixed overhead costs Depreciation Building 24,000 Depreciation-Machinery B0,000 Taxes and insurance 12,000 Supervision 79,000 Total fixed overhead costs Total overhead costs $360,000 195,000 $555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. $ 464,100 526,125 Direct materials (91,000 Ibs. @ $5.10 per lb.) Direct labor (30,500 hrs. @ $17.25 per hr.) Overhead costs Indirect materials Indirect labor Power Repairs and maintenance Depreciation-Building Depreciation Machinery Taxes and insurance Supervision Total costs $ 44,250 177, 750 43,000 96.000 24,000 75.000 11, 500 89.000 560,500 $1,550,725

Answer 1

Solution:

Direct Labor Cost Variance
Actual Cost				Standard cost for actual quantity				Standard Cost
AH	*	AR		AH	*	SR		SH	*	SR
30500	*	$17.25		30500	*	$17.00		30000	*	$17.00
	$5,26,125.00				$5,18,500.00				$5,10,000.00
			$7,625.00				$8,500.00
Direct Labor rate Variance				$7,625.00	Unfavorable
Direct Labor Efficiency variance				$8,500.00	Unfavorable
Total Direct Labor Cost variance				16,125.00	Unfavorable

Note: Standard hours = (20000*75%) units * 2 hours per unit = 15000 * 2 = 30000 hours