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 (1.7 hrs. $13.00 per hr.) Overhead (1.7 hrs. $18.50 per hr.) Total standard cost $20.00 22.10 31.45 $73.55 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 Indirect labor Power Repairs and maintenance Total variable overhead costs $ 15,000 75,000 15,000 30,000 $135,000 Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision Total fixed overhead costs 25,000 72,000 16,000 223,750 336,750 $471,750 Total overhead costs

Answer 1

Solution:

Flexible Budget is the budget prepared at standard / budgeted cost at the given actual level of activity for the period.

ANTUAN COMPANY
Flexible Overhead Budget
For the 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	17000
Variable overhead costs (Quantity x Variable Cost per Unit)
Indirect materials	$1 ($15,000 / 15,000 unit)		$13,000	$15,000	$17,000
Indirect labor	$5 ($75,000 / 15,000 Unit)		$65,000	$75,000	$85,000
Power	$1 ($15,000 / 15,000 Unit)		$13,000	$15,000	$17,000
Repair and maintenance	$2 ($30,000 / 15,000 Unit)		$26,000	$30,000	$34,000
Total variable factory overhead			$117,000	$135,000	$153,000
Fixed Overhead Costs
Depreciation - Building		$25,000	$25,000	$25,000	$25,000
Depreciation - machinery		$72,000	$72,000	$72,000	$72,000
Taxes and insurance		$16,000	$16,000	$16,000	$16,000
Supervision		$223,750	$223,750	$223,750	$223,750
Total Fixed Overhead costs		$336,750	$336,750	$336,750	$336,750
Total Overhead Costs			$453,750	$471,750	$489,750

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