The predetermined overhead rate ($18.50 per direct labor hour) is based on an ex

Question

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 30,000 Total variable overhead costs $ 135,000 Fixed overhead costs Depreciation—Building 25,000 Depreciation—Machinery 70,000 Taxes and insurance 17,000 Supervision 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 (46,000 Ibs. @ $4.20 per lb.) $ 193,200 Direct labor (22,000 hrs. @ $14.30 per hr.) 314,600 Overhead costs Indirect materials $ 41,900 Indirect labor 176,650 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 25,000 Depreciation—Machinery 94,500 Taxes and insurance 15,300 Supervision 308,000 713,100 Total costs $ 1,220,900 rev: 03_28_2018_QC_CS-122864

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.

3. Compute the direct materials cost variance, including its price and quantity variances.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

4. Compute the direct labor cost variance, including its rate and efficiency variances.

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.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 (3.0 Ibs. @ $4.00 per Ib.) $ 12.00 Direct labor (2.0 hrs. @ $14.00 per hr.) 28.00 Overhead (2.0 hrs. @ $18.50 per hr.) 37.00 Total standard cost $ 77.00

Explanation / Answer

Part 1 & 2

Part 3

Part 4

Part 5

$713,100

$158,100

ANTUAN COMPANY Flexible Overhead Budgets For Month Ended October 31 Flexible Budget Flexible Budget for Variable Amount per Unit Total Fixed Cost 65% of capacity 75% of capacity 85% of capacity Sales (in units) 13,000 15,000 17,000 Variable costs Indirect materials $1.00 13,000 15,000 17,000 Indirect labor 5.00 65,000 75,000 85,000 Power 1.00 13,000 15,000 17,000 Repairs and maintenance 2.00 26,000 30,000 34,000 Total variable costs $9.00 117,000 135,000 153,000 Fixed costs Depreciation—Building $25,000 25,000 25,000 25,000 Depreciation—Machinery 70,000 70,000 70,000 70,000 Taxes and insurance 17,000 17,000 17,000 17,000 Supervision 308,000 308,000 308,000 308,000 Total fixed costs $420,000 420,000 420,000 420,000 Total overhead costs $537,000 $555,000 $573,000

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