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

Question

26.

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.

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

Direct materials (3.0 Ibs. @ $5.00 per Ib.) $ 15.00 Direct labor (1.7 hrs. @ $11.00 per hr.) 18.70 Overhead (1.7 hrs. @ $18.50 per hr.) 31.45 Total standard cost $ 65.15

Explanation / Answer

Direct labor Standard cost actual cost AH * AR AH * SR SH * SR 28,000 * 11.1 28,000 11 25500 11 310800 308000 280500 2800 27500 Direct labor rate variance 2800 U direct labor efficiency variance 27,500 U direct labor cost variance 30300 U Standard hours = 20000*75%*1.7 = 25,500

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