Question

Required information [The following information applies to the questions displayed below.] Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $6.00 per Ib.) Direct labor (1.9 hrs. @ $13.00 per hr.) Overhead (1.9 hrs. @ $18.50 per hr.) Total standard cost $24.00 24.70 35.15 $83.85 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 45,000 Total variable overhead costs Fixed overhead costs Depreciation-Building 24,000 Depreciation Machinery 71,000 Taxes and insurance 17,000 Supervision 265, 250 Total fixed overhead costs Total overhead costs $150,000 377,250 $527,250

Answer 1

Ans.	Actual volume on 75% capacity = 20,000 * 75%
	15,000 units
	*Standard quantity (SQ)   =   Actual output * Materials quantity per unit of output
	15,000 units * 4 Ibs.
	60,000	Ibs.
	Actual Cost		Actual quantity at Standard price		Standard Cost
	Actual quantity * Actual price		Actual quantity * Standard price		Standard quantity * Standard price
	61,000 * $6.20		61,000 * $6.00		60,000 * $6.00
	$378,200		$366,000		$360,000
		-$12,200		-$6,000
	Materials price variance	-$12,200	or   $12,200 Unfavorable
	Materials quantiy variance	-$6,000	or   $6,000 Unfavorable
	Total Materials Variance	-$18,200	or   $18,200 Unfavorable
	*Materials price variance = Actual quantity at standard price - Actual cost
	*Materials quantity variance = Standard cost - Actual quantity at standard price
	*If the standard cost, price and quantity are higher than the actual it means the variance is favorable.
	*If the standard cost, price and quantity are lower than the actual it means the variance is unfavorable.