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

Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (4.8 Ibs.$5.00 per Ib.) Direct labor (1.7 hrs. $13.00 per hr.) Overhead (1.7 hrs. $18.50 per hr.) Total standard cost $20.00 22.10 31.45 $73.55 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 Indirect labor Power $ 15,000 75,000 15,000 30,000 Repairs and maintenance Total variable overhead costs $135,000 Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision Total fixed overhead costs 25,000 72,000 16,000 223,750 336,750 $471,750 Total overhead costs The company incurred the following actual costs when it operated at 75% of capacity in October Direct materials (60,500 Ibs. @ $5.20 per lb.) Direct labor (28,000 hrs. $13.30 per hr.) Overhead costs $ 314,600 372,400 Indirect materials Indirect labor Power Repairs and maintenance Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision $. 41,300 176,450 17,250 34,500 25,000 97,200 14,400 223,750 629,850 $1,316,850 Total costs

Explanation / Answer

1) Direct material variance :

Actual cost Standard cost AQ AP AQ*AP AQ SP AQ*SP SQ SP SQ*SP 60500 5.20 314600 60500 5 302500 80000 5 400000 12100 97500 Material price variance 12100 Unfavourable Material quantity variance 97500 Favourable Material cost variance 85400 Favourable

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