Antuan Company set the following standard costs per unit for its product.
Direct materials (3.0 pounds @ $4.00 per pound) $ 12.00
Direct labor (1.9 hours @ $13.00 per hour) 24.70
Overhead (1.9 hours @ $18.50 per hour) 35.15
Standard cost per unit $ 71.85
The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level 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
Maintenance 30,000
Total variable overhead costs 135,000
Fixed overhead costs
Depreciation-Building 25,000
Depreciation-Machinery 18,000
Taxes and insurance 280,250
Supervisory salaries 280,250
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 (46,000 pounds @ $4.20 per pound) $ 193,200
Direct labor (21,000 hours @ $13.10 per hour) 275,100
Overhead costs
Indirect materials $ 41,550
Indirect labor 17,250
Power 34,850
Maintenance 16,280
Depreciation-Building 25,000
Depreciation-Machinery 18,000
Taxes and insurance 280,250
Supervisory salaries 280,250
Total costs $ 1,153,850
Required:
1. Prepare flexible overhead budgets for October showing amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.
ANTUAN COMPANY
Flexible Overhead Budgets
For Month Ended October 31
Variable Amount Total Fixed
per Unit Cost
Flexible Budget at Capacity Level of
65% 75% 85%
Production (in units)
Variable overhead costs
Indirect materials
Indirect labor
Power
Maintenance
Total variable overhead
Fixed overhead costs
$ 0.00 $ 0 $ 0 $ 0
Depreciation-Building
Depreciation-Machinery
Taxes and insurance
Supervisory salaries
Total fixed overhead
Total overhead costs
2. Compute the direct materials variance, including its price and quantity variances.
Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.
3. Compute the direct labor variances, including its rate and efficiency variances.
Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance. Round "Rate per hour" answers to two decimal places.
4. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.
Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Expected production volume
Production level achieved
Volume Variance
Flexible Budget Actual Results Variances Favorable or Unfavorable
Variable overhead costs
Fixed overhead costs
Total overhead costs
Volume Variance
Volume variance
Total overhead variance
