Question

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

Direct materials (3.0 Ibs. @ $6.00 per Ib.)	$	18.00
Direct labor (1.8 hrs. @ $11.00 per hr.)		19.80
Overhead (1.8 hrs. @ $18.50 per hr.)		33.30
Total standard cost	$	71.10

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		23,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		253,500
Total fixed overhead costs					364,500
Total overhead costs				$	499,500

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

Direct materials (46,000 Ibs. @ $6.10 per lb.)				$	280,600
Direct labor (20,000 hrs. @ $11.40 per hr.)					228,000
Overhead costs
Indirect materials	$	41,150
Indirect labor		176,450
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		253,500			657,000
Total costs				$	1,165,600

Required:
1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.

	ANTUAN COMPANY Flexible Overhead Budgets For 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) Variable overhead costs $0.00 0 0 0 Fixed overhead costs 0 0 0 0 Total overhead costs

Answer 1

Solution 1 and 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	$15,000	$17,000
Indirect labor	$5.00		$65,000	$75,000	$85,000
Power	$1.00		$13,000	$15,000	$17,000
Repairs and maintenance	$2.00		$26,000	$30,000	$34,000
Total variable costs	$9.00		$1,17,000	$1,35,000	$1,53,000
Fixed overhead costs:
Depreciation - Building		$23,000	$23,000	$23,000	$23,000
Depreciation - Machinery		$71,000	$71,000	$71,000	$71,000
Taxes and Insurance		$17,000	$17,000	$17,000	$17,000
Supervision		$2,53,500	$2,53,500	$2,53,500	$2,53,500
Total fixed costs		$3,64,500	$3,64,500	$3,64,500	$3,64,500
Total overhead costs			$4,81,500	$4,99,500	$5,17,500