Question

Problem 21-3A Flexlble budget preparation; computation of materlals, labor, and overhead variances and overhead varlance report LO P1, P2, P3, P4 [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.e Ibs.@ $4.00 per Ib.) Direct labor (1.9 hrs. $11.00 per hr.) Overhead (1.9 hrs. $18.se per hr.) $12.00 20.90 35.15 $68.05 Total standard cost 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,eee 75,000 Indirect labor 15,e0e POwer Repairs and maintenance Total variable overhead costs Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and ins ance Supervision Total fixed overhead costs 30,eee $135,eee 24,e0e 7e,e0e 17,eee 281,250 392,250 $527,250 Total overhead costs The company Incurred the following actual costs when It operated at 75% of capacity In October Direct materials (46,500 Ibs. $4.10 per 1b.) Direct labor (21,eee hrs. @ $11.40 per hr.) overhead costs Indirect naterials Indirect labor s190,65e 239,400 $41,000 176,800 17,250 34,see 24,000 94,see 15,300 281,250 Power Repairs and maintenance Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision 684,600 $1,114,650 Total costs

Answer 1

Solution 1&2:

Antuan company
Flexible Overhead Budget
For month ended Oct 31
Particulars	Flexible Budget		Flexible Budget for
	Variable amount per unit	Total fixed cost	65% of capacity	75% of capacity	85% of capacity
Sales (In units)			13000	15000	17000
Variable overhead costs:
Indirect materials	$1.00		$13,000.00	$15,000.00	$17,000.00
Indirect labor	$5.00		$65,000.00	$75,000.00	$85,000.00
Power	$1.00		$13,000.00	$15,000.00	$17,000.00
Repairs and maintenance	$2.00		$26,000.00	$30,000.00	$34,000.00
Total variable costs	$9.00		$117,000.00	$135,000.00	$153,000.00
Fixed overhead costs:
Depreciation - Building		$24,000.00	$24,000.00	$24,000.00	$24,000.00
Depreciation - Machinery		$70,000.00	$70,000.00	$70,000.00	$70,000.00
Taxes and Insurance		$17,000.00	$17,000.00	$17,000.00	$17,000.00
Supervision		$281,250.00	$281,250.00	$281,250.00	$281,250.00
Total fixed costs		$392,250.00	$392,250.00	$392,250.00	$392,250.00

Solution 3:

Direct Material Cost Variance
Actual Cost				Standard cost for actual quantity				Standard Cost
AQ *	AP =			AQ *	SP =			SQ *	SP =
46500	$4.10	$190,650.00		46500	$4.00	$186,000.00		45000	$4.00	$180,000.00
			$4,650 U				$6,000 U
			Direct Material Price Variance				Direct Material Qty variance
Direct material price variance				$4,650.00	U
Direct material quantity variance				$6,000.00	U
Direct material cost variance				$10,650.00	U

Solution 4:

Direct Labor Cost Variance
Actual Cost				Standard cost for actual quantity				Standard Cost
AQ *	AP =			AQ *	SP =			SQ *	SP =
21000	$11.40	$239,400.00		21000	$11.00	$231,000.00		28500	$11.00	$313,500.00
			$8,400 U				$82,500 F
			Direct Labor rate Variance				Direct Labor Efficiency Variance
Direct Labor Rate variance				$8,400.00	U
Direct Labor Efficiency variance				$82,500.00	F
Direct labor cost variance				$74,100.00	F

Solution 5:

Antuan Company
Overhead variance Report
For the month ended October 31
Expected production volume	75% of capacity
Production level achieved	75% of capacity
Volume variance	$0.00
Controllable variance	Flexible budget	Actual results	Variances	Fav/Unfav.
Variable overhead costs:
Indirect materials	$15,000.00	$41,000.00	$26,000.00	Unfavorable
Indirect labor	$75,000.00	$176,800.00	$101,800.00	Unfavorable
Power	$15,000.00	$17,250.00	$2,250.00	Unfavorable
Repairs and maintenance	$30,000.00	$34,500.00	$4,500.00	Unfavorable
Total variable costs	$135,000.00	$269,550.00	$134,550.00	Unfavorable
Fixed overhead costs:
Depreciation - Building	$24,000.00	$24,000.00	$0.00
Depreciation - Machinery	$70,000.00	$94,500.00	$24,500.00	Unfavorable
Taxes and Insurance	$17,000.00	$15,300.00	$1,700.00	Favorable
Supervision	$281,250.00	$281,250.00	$0.00	Unfavorable
Total fixed costs	$392,250.00	$415,050.00	$22,800.00	Unfavorable
Total overhead costs	$527,250.00	$684,600.00	$157,350.00	Unfavorable