Antuan Company set the following standard costs for one unit of Its product Dire

Question

Antuan Company set the following standard costs for one unit of Its product Direct materla's (3.0 lbs. $4.0 per lb.) Direct labor (2.0 hrs. $12.0 per hr) Overhead (2.0 hrs. $18.50 per hr.) $ 12.00 24.00 37.00 Total standard cost $ 73.00 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% level. Overhead Budget (75% Capacity) Variable overhead costs Ind rect materia's Ind rect labor Power Repairs and maintenance $ 15,000 75,000 15,000 45,000 Total variable overhead costs $150,000 Fixed overhead costs 23,000 74,000 7,000 291,000 Taxes and insurance Total fixed overhead costs 405,000 Total overhead costs $555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materla's (46,000 lbs. $4.10 per Ib.) Direct labor (29,000 hrs. $12.40 per hr) Overhead costs $ 188,600 359,600 $ 45.750 177,250 17,250 51,750 23,000 99,900 Ind rect materla's Ind rect labor Repairs and maintenance Taxes and insurance 291,000 721,200 Total costs $1,269,400

Explanation / Answer

Direct Labour Cost Data

2x15000

= 30000

Direct Labour Rate Variance = (Standard Rate - Actual Rate) x Actual Hours

= (12-12.4)x 29000

= $11600 Unfavourable

Direct Labour Efficiency Variance = (Standard Hours - Actual Hours) x Standard Rate

= (30000-29000) x 12

= $12000 Favourable

Direct Labour Cost Variance = -11600+ 12000

= $400 Favourable

Standard Hours Standard Rate Standard Cost Actual Hours Actual Rate Actual Cost Direct Labour

2x15000

= 30000

12 360000 29000 12.4 359600

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