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

Question

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

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.

15,000

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

Direct materials (4.0 Ibs. @ $5.00 per Ib.) $ 20.00 Direct labor (1.7 hrs. @ $12.00 per hr.) 20.40 Overhead (1.7 hrs. @ $18.50 per hr.) 31.45 Total standard cost $ 71.85 Problem 23-5A Part 1&2 Required: 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed ANTUAN COMPANY Flexible Overhead Budgets For Month Ended October 31 Flexible Budget Variable Amount Total Fixed 65% of capacity Flexible Budget for 75% of capacity 85% of capacity per Unit Cost Sales (n units) Variable costs Fixed costs Total overhead costs

Explanation / Answer

Answer 1 & 2. ANTUAN COMPANY Flexible Overhead Budgets For Month Ended October 31 Flexible Budget Flexible Budget for Variable Amt. Per Unit Total Fixed Costs 65% of Capacity 75% of Capacity 85% of Capacity Sales In Unilts          13,000.00          15,000.00          17,000.00 Variable Costs Indirect Materials                     1.00          13,000.00          15,000.00          17,000.00 Indirect Labor                     6.00          78,000.00          90,000.00        102,000.00 Power                     1.00          13,000.00          15,000.00          17,000.00 Repair & Maintenenace                     2.00          26,000.00          30,000.00          34,000.00 Total Variable Overhead Costs                   10.00        130,000.00        150,000.00        170,000.00 Fixed Overhead Costs Depreciation - Building          25,000.00          25,000.00          25,000.00          25,000.00 Depreciation - Machinery          71,000.00          70,000.00          70,000.00          70,000.00 Taxes & Insurance          18,000.00          17,000.00          17,000.00          17,000.00 Supervision        207,750.00        207,750.00        207,750.00        207,750.00 Total Fixed Overhead Costs                          -          321,750.00        319,750.00        319,750.00        319,750.00 Total Overhead Costs        449,750.00        469,750.00        489,750.00 Answer 3. Material Actual Cost Standard Cost AQ X AP AQ X SP SQ X SP          61,500 X           5.20          61,500 X           5.00          60,000 X           5.00          319,800          307,500          300,000        12,300          7,500 Direct Material Price Variance        12,300 (U) Direct Material Quantity Variance          7,500 (U) Total Direct Material Variance        19,800 (U) Answer 4. Labor Actual Cost Standard Cost AH X AP AH X SP SH X SP          24,000 X         12.30          24,000 X               12          25,500 X               12          295,200          288,000          306,000          7,200        18,000 Direct Labor Rate Variance          7,200 (U) Direct Labor Efficiency Variance        18,000 (F) Total Direct Labor Variance        10,800 (F) Answer 5. ANTUAN COMPANY Overhead Variance Report For Month Ended October 31 Expected Production Volume          15,000.00 Production Level achieved          15,000.00 Volume Variance                          -   Flexible Budget Actual results Variances Fav. / Unfav. Variable Costs Indirect Materials          15,000.00          41,950.00          26,950.00 Unfav. Indirect Labor          90,000.00        176,150.00          86,150.00 Unfav. Power          15,000.00          17,250.00             2,250.00 Unfav. Repair & Maintenenace          30,000.00          34,500.00             4,500.00 Unfav. Total Variable Overhead Costs        150,000.00        269,850.00        119,850.00 Unfav. Fixed Overhead Costs Depreciation - Building          25,000.00          25,000.00                          -   Depreciation - Machinery          70,000.00          95,850.00          25,850.00 Unfav. Taxes & Insurance          17,000.00          16,200.00                800.00 Fav. Supervision        207,750.00        207,750.00                          -   Unfav. Total Fixed Overhead Costs        319,750.00        344,800.00          25,050.00 Unfav. Total Overhead Costs        469,750.00        614,650.00        144,900.00 Unfav.

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