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 ((3.0 Ibs. @ $6.00 per Ib.) $ 18.00 Direct labor (1.7 hrs. @ $14.00 per hr.) 23.80 Overhead (1.7 hrs. @ $18.50 per hr.) 31.45 Total standard cost $73.25. 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 Indirect materials $ 15,000 Indirect labor 75,000 Power 15,000 Repairs and maintenance 30,000 Total variable overhead costs $ 135,000 Fixed overhead costs Depreciation—building 24,000 Depreciation—machinery 70,000 Taxes and insurance 17,000 Supervision 196,000 Total fixed overhead costs 336,750 Total overhead costs $ 471,750. The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (46,000 Ibs. @ $6.10 per lb.) $ 280,600 Direct labor (28,000 hrs. @ $14.20 per hr.) 397,600 Overhead costs Indirect materials $ 41,950 Indirect labor 176,500 Power 17,250 Repairs and maintenance 34,500 Depreciation—building 24,000 Depreciation—machinery 94,500 Taxes and insurance 15,300 Supervision 225,750 629,750 Total costs $ 1,307,950

3. Compute the direct materials cost variance, including its price and quantity variances.

AQ = Actual Quantity

SQ = Standard Quantity

AP = Actual Price

SP = Standard Price

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

Explanation / Answer

Standard Cost data per unit:

Direct materials ((3.0 Ibs. @ $6.00 per Ib.) $ 18.00

Direct labor (1.7 hrs. @ $14.00 per hr.) $ 23.80

Actual cost data:

Total units = 20000*75% = 15000 units

Direct materials (46,000 Ibs. @ $6.10 per lb.) $ 280,600

Direct labor (28,000 hrs. @ $14.20 per hr.) 397,600

Actual cost data per unit:

Direct materials (46000/15000 = 3.06 Ibs. @ $6.10 per lb.) $ 18.66

Direct labor (28000/15000 = 1.866 hrs. @ $14.20 per hr.) $ 26.50

3)

Direct material cost variance = 280600 - (18*15000) = 280600 - 270000 = 10600(U)

Material rate variance = (6 - 6.10)*(15000*3.06666) = 0.10*46000 = 4600(U)

Material quantity variance = (46000 - 45000)*6 = 1000*6 = 6000(U)

4)

Labor cost variance = 397600 - (23.80*15000) =397600 - 357000 = 40600 (U)

Labor rate variance = (14 - 14.20)*28000 = 5600 (U)

Labor efficiency variance = (28000 - 25500)*14 = 35000 (U)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.