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.

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

      

9.

Required information

Prepare a detailed overhead variance report that shows the variances for individual items of overhead.

    

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

Explanation / Answer

Direct Labour Rate Varriance = (AH*SR) - (AH*AR)

= (29000*$11) - (29000*11.10) = -$2900

Direct Labour efficiency Varriance = (SR*SH)- (SR*AH)

= ($11*40000) - ($11*29000) = $121000

Direct Labour Cost Varriance = Labour Rate Varriance+Labour Efficiency Varriance

= - $2900+ $121000 =$118100

Varriable Overhead: Budgeted Actual Varriance Fav./Unfav. Indirect Material $15,000.00 $41,500.00 -$26,500.00 U Indirect Labour $75,000.00 $176,350.00 -$101,350.00 U Power $15,000.00 $17,250.00 -$2,250.00 U Repair $30,000.00 $34,500.00 -$4,500.00 U Fixed Overhead: Depreciation $97,000.00 $122,200.00 -$25,200.00 U Tax and Insurance $18,000.00 $16,200.00 $1,800.00 F Supervision $305,000.00 $305,000.00 $0.00 -- Total $555,000.00 $713,000.00 -$158,000.00 U

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