Question

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

Direct materials (5.0 Ibs. @ $5.00 per Ib.)	$	25.00
Direct labor (1.9 hrs. @ $10.00 per hr.)		19.00
Overhead (1.9 hrs. @ $18.50 per hr.)		35.15
Total standard cost	$	79.15

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		70,000
Taxes and insurance		16,000
Supervision		283,250
Total fixed overhead costs					392,250
Total overhead costs				$	527,250

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

Direct materials (75,500 Ibs. @ $5.10 per lb.)				$	385,050
Direct labor (20,000 hrs. @ $10.20 per hr.)					204,000
Overhead costs
Indirect materials	$	41,550
Indirect labor		176,250
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		94,500
Taxes and insurance		14,400
Supervision		283,250			684,700
Total costs				$	1,273,750

rev: 03_28_2018_QC_CS-122864

Problem 21-3A Part 3

3. Compute the direct materials cost variance, including its price and quantity variances.

X Answer is complete but not entirely correct. Actual Cost Standard Cost AQ LX API AQ VLX SP SQ X 75,500 x 15,000 x 10.10 SP 500.00 5.00 7,550 2,500 75.000 5,050 72,500 Direct materials price variance Direct materials quantity variance $ 5,050 72,500 Unfavorable Unfavorable Unfavorable Total direct materials variance 10 050

Answer 1

Direct Material Cost, Price and Quantity Variance X / Actual Cost AQ X 75500 X 385050 AP 5.10 AQ 75500 SP 5.00 Standard Cost SQL X 75000 X 375000 SP 5.00 377500 7550 2500 Direct Material Price Varaince 7550 Unfavorable Direct Material Quantity Varaince 2500 Unfavorable Total Direct Material Varaince 10050 Unfavorable Factory Capacity =20,000 Units 75% Capacity = 20,000*75% Standard Quantity = SQ For 1 Units * Total Prodcued = (1500*5) 15000 75000