Direct materials (3.0 Ibs. $5.00 per Ib. $15.00 Direct labor (1.7 hrs. $11.00 pe

Question

Direct materials (3.0 Ibs. $5.00 per Ib. $15.00 Direct labor (1.7 hrs. $11.00 per hr.) Overhead (1.7 hrs. e $18.50 per hr.) Total standard cost 18.70 31.45 $65.15 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 Repairs and maintenance Total variable overhead costs s 15,000 75,000 15,000 30,000 $135,000 Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision Total fixed overhead costs 25,000 72,000 17,000 222,750 336, 750 $471,750 Total overhead costs The company incurred the following actual costs when it operated at 75% of capacity in October Direct materials (46,500 Ibs $5.20 per lb.) Direct labor (29,000 hrs. $11.10 per hr.) Overhead costs s 241,800 321,900 Indirect materials Indirect labor Power Repairs and maintenance Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision $41,950 176,950 17,250 34, 500 25,000 97,200 15,300 222,750 630,900 $1,194, 600

Explanation / Answer

Actual Cost Standard Cost AQ x AP AQ x SP SQ x SP 46,500 x 5.2 46,500 x 5 60,000 x 5 241800 232500 300000 9300 67500 Direct materials price variance 9300 Unfavorable Direct materials quantity variance 67500 Favorable Total direct materials variance 58200 Favorable

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