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

Question

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.

30,000

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (3.0 Ibs. @ $5.00 per Ib.) $ 15.00 Direct labor (2.0 hrs. @ $13.00 per hr.) 26.00 Overhead (2.0 hrs. @ $18.50 per hr.) 37.00 Total standard cost $ 78.00 182. 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 65% of capacity 85% of capacity Variable Amount Total Fixed Cost er Unit Sales (in units) Variable overhead costs 0.00 Fixed overhead costs Total overhead costs

Explanation / Answer

Step 1 - Flexible budget overhead

$2

($30000/15000)

$26000

(13000*$2)

$5

($75000/15000)

$65000

(13000*$5)

$75000 (15000*5)

$2

($30000/15000)

$26000

(13000*$2)

$2

($30000/15000)

$26000

(13000*$2)

Step 2 - Direct Material variances

45000 lbs

(15000 units * 3 lbs per unit)

Step 3 - Direct Labour Variances

30000

(15000 units * 2 hours per unit

Step 4 - Detailed variance overhead report

Antuam Company Flexible overhead budget For the month ended October 31 Particulars Flexible Budget Flexible budget for Variable amount per unit Fixed cost 65% of capacity 75% of capacity 85% of capacity Sales (in units) 13000 (65% * 20000) 15000 (20000 * 75%) 17000 (20000 * 85%) Variable overhead cost Indirect Material

$2

($30000/15000)

$26000

(13000*$2)

$30000 (15000*$2) $34000 (17000*$2) Indirect Labour

$5

($75000/15000)

$65000

(13000*$5)

$75000 (15000*5)

$85000 (17000*$5) Power

$2

($30000/15000)

$26000

(13000*$2)

$30000 (15000*$2) $34000 ($17000*$2) Repair and maintenance

$2

($30000/15000)

$26000

(13000*$2)

$30000 (15000*$2) $34000 (17000*$2) Total variable cost (A) $11 $143000 $165000 $187000 Fixed cost Depreciation - Building $24000 $24000 $24000 $24000 Depreciation - Machinery $71000 $71000 $71000 $71000 Taxes & Insurance $18000 $18000 $18000 $18000 Supervision $277000 $277000 $277000 $277000 Total fixed cost (B) $390000 $390000 $390000 $390000 Total overhead cost (A + B) $533000 $555000 $587000

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