Antuan Company set the following standard costs per unit for its product.
Direct materials (4.0 pounds @ $6.00 per pound) $ 24.00
Direct labor (2.0 hours @ $11.00 per hour) 22.00
Overhead (2.0 hours @ $18.50 per hour) 37.00
Standard cost per unit $ 83.00
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 24,000
Depreciation-Machinery 71,000
Taxes and insurance 17,000
Supervisory salaries 308,000
Total fixed overhead costs 420,000
Total overhead costs $ 555,000
The company incurred the following actual costs when it operated at 75% of capacity in October.
Direct materials (60,500 pounds @ $6.20 per pound) $ 375,100
Direct labor (20,000 hours @ $11.40 per hour) 228,000
Overhead costs
Indirect materials $ 41,900
Indirect labor 176,100
Power 17,250
Maintenance 34,500
Depreciation-Building 24,000
Depreciation-Machinery 95,850
Taxes and insurance 15,300
Supervisory salaries 308,000
Total costs $ 1,316,000
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.
Actual Cost
Actual quantity 60,500
Actual price 6.20
$375,100
Standard Cost
Standard quantity
Standard price 6.00
