5
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
Indirect labor
of 4
Power
Maintenance
Total variable overhead costs
Fixed overhead costs
Depreciation-Building
Depreciation-Machinery
Taxes and insurance
03:15:11
Supervisory salaries
Total fixed overhead costs
Total overhead costs
The company incurred the following actual costs when it operated at 75% of capacity in October.
Direct materials (61,000 pounds @ $4.20 per pound)
Direct labor (20,000 hours @ $12.30 per hour)
Overhead costs
Indirect materials
Indirect labor
Power
Maintenance
Depreciation-Building
Depreciation-Machinery
Taxes and insurance
Supervisory salaries
Total costs
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.
Expected production volume
Production level achieved
Volume Variance
Variable overhead costs
$ 15,000
75,000
15,000
30,000
135,000
23,000
72,000
17,000
252,500
364,500
$ 499,500
$ 256,200
246,000
$ 41,950
176,250
17,250
34,500
23,000
72,000
15,300
252,500
657,950
$1,160,150
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Favorable or Unfavorable
Fixed overhead costs
Total overhead costs
Volume Variance
Volume variance
Total overhead variance
