Question

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

Direct materials (4.0 Ibs. @ $4.00 per Ib.)	$	16.00
Direct labor (1.7 hrs. @ $10.00 per hr.)		17.00
Overhead (1.7 hrs. @ $18.50 per hr.)		31.45
Total standard cost	$	64.45

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		24,000
Depreciation—Machinery		70,000
Taxes and insurance		18,000
Supervision		224,750
Total fixed overhead costs					336,750
Total overhead costs				$	471,750

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

Direct materials (61,000 Ibs. @ $4.10 per lb.)				$	250,100
Direct labor (22,000 hrs. @ $10.40 per hr.)					228,800
Overhead costs
Indirect materials	$	41,100
Indirect labor		176,300
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		94,500
Taxes and insurance		16,200
Supervision		224,750			628,600
Total costs				$	1,107,500

5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.)

Answer 1

Antuan Company Over Head Variance Report For the month ended October 31 15000|(20000*75%) 15000 Expected Production Volume Production level achieved Volume Variance 0 Budgeted (1) Actual Result (2) Variance (1-2) Fav./Unfav. Variable Costs Indirect Materials Indirect Labor 15,000 75,000 15,000 30,000 41,100 176,300 17,250 34,500 -26,100 Unfav -101,300 Unfav -2,250 Unfav -4,500 Unfav Power Repairs and Maintenance 135,000 269,150 -134,150 Unfav Total Variable Costs (a) Fixed Costs Depreciation - Building Depreciation - Machinery Taxes and Insurance Supervision 24,000 70,000 18,000 224,750 24,000 94,500 16,200 224,750 O No var -24,500 Unfav 1,800 fav O No var Total Fixed Costs (b) Total Overhead Costs (a+b) 336,750 471,750 359,450 628,600 -22,700 Unfav -156,850 Unfav Fav. Unfav. Favorable Unfavorable No Variance No var