Question

[The following information applies to the questions displayed below.]

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

Direct materials (3.0 Ibs. @ $5.00 per Ib.)	$	15.00
Direct labor (1.8 hrs. @ $13.00 per hr.)		23.40
Overhead (1.8 hrs. @ $18.50 per hr.)		33.30
Total standard cost	$	71.70

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	$	30,000
Indirect labor		90,000
Power		30,000
Repairs and maintenance		30,000
Total variable overhead costs				$	180,000
Fixed overhead costs
Depreciation—Building		23,000
Depreciation—Machinery		72,000
Taxes and insurance		16,000
Supervision		208,500
Total fixed overhead costs					319,500
Total overhead costs				$	499,500

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

Direct materials (45,500 Ibs. @ $5.20 per lb.)				$	236,600
Direct labor (21,000 hrs. @ $13.20 per hr.)					277,200
Overhead costs
Indirect materials	$	41,900
Indirect labor		176,950
Power		34,500
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		97,200
Taxes and insurance		14,400
Supervision		208,500			630,950
Total costs				$	1,144,750

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

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	30,000	41,900	11,900	Unfavorable
Indirect labor	90,000	176,950	86,950	Unfavorable
Power	30,000	34,500	4,500	Unfavorable
Repairs and maintenance	30,000	34,500	4,500	Unfavorable
Total variable costs	180000	287850	107,850	Unfavorable
Fixed costs
Depreciation—Building	23,000	23,000	0	No variance
Depreciation—Machinery	72,000	97,200	25,200	Unfavorable
Taxes and insurance	16,000	14,400	1,600	Favorable
Supervision	208,500	208,500	0	No variance
Total fixed costs	319500	343100	23,600	Unfavorable
Total overhead costs	499500	630950	131,450	Unfavorable