The predetermined overhead rate ($18.50 per direct labor hour) is based on an ex

Question

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.

Antuan Company set the following standard costs for one unit of its product. Required 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed ANTUAN COMPANY Flexible Overhead Budgets For Month Ended October 31 Flexible Budget for 75% of capacity Flexible Budget Variable Amount er Unit Total Fixed Cost 65% of capacity 85% of capacity Sales (in units) Variable overhead costs Indirect materials Indirect labor Power Repairs and maintenance 15,000 90,000 15,000 30,000 0.00 150,000 0 Fixed overhead costs Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision 23,000 71,000 17,000 183,000 294,000 Total overhead costs

Explanation / Answer

ANTUAN COMPANY Flexible Overhead Budget For month ended October 31 Flexible Budget Flexible Budget for Variable amount Total fixed cost 65% of capacity 75% of capacity 85% of capacity Sales (in units) 13000 15000 17000 (20000*65%) (20000*65%) (20000*65%) Variable overhead costs Indirect materials 1 13000 15000 17000 (15000/15000) (13000*1) (17000*1) Indirect labor 6 78000 90000 102000 (90000/15000) (13000*6) (17000*6) Power 1 13000 15000 17000 (15000/15000) (13000*1) (17000*1) Repairs and Maintenance 2 26000 30000 34000 (30000/15000) (13000*2) (17000*2) 10 130000 150000 170000 Fixed overhead costs Depreciation - Building 23000 23000 23000 23000 Depreciation - Machinery 71000 71000 71000 71000 Taxes and Insurance 17000 17000 17000 17000 Supervision 183000 183000 183000 183000 294000 294000 294000 294000 Total overhead costs 10 294000 424000 444000 464000

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