Antuan Company set the following standard costs for one unit of its product.
Direct materials (6 Ibs. @ \(5 per Ib.) | \) 30 |
Direct labor (2 hrs. @ \(17 per hr.) | 34 |
Overhead (2 hrs. @ \)18 .50 per hr.) | 37 |
Total standard cost. | \(101 |
The predetermined overhead rate (\)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 \( 45,000 | |
Indirect labor 180,000 | |
Power 45,000 | |
Repairs and maintenance 90,000 | |
Total variable overhead costs | \)360,000 |
Fixed overhead costs | |
Depreciation—Building 24,000 | |
Depreciation—Machinery 80,000 | |
Taxes and insurance 12,000 | |
Supervision 79,000 | |
Total fixed overhead costs | 195,000 |
Total overhead costs | \(555,000 |
The company incurred the following actual costs when it operated at 75% of capacity in October.
Direct materials (91,000 Ibs. @ \)5 .10 per lb.) | \( 464,100 |
Direct labor (30,500 hrs. @ \)17 .25 per hr.) | 526,125 |
Overhead costs | |
Indirect materials \( 44,250 | |
Indirect labor 177,750 | |
Power 43,000 | |
Repairs and maintenance 96,000 | |
Depreciation—Building 24,000 | |
Depreciation—Machinery 75,000 | |
Taxes and insurance 11,500 | |
Supervision 89,000 | 560,500 |
Total costs | \)1,550,725 |
Required
1.Examine the monthly overhead budget to
(a) determine the costs per unit for each variable overhead item and its total per-unit costs and
(b) Identify the total fixed costs per month.
2.Prepare flexible overhead budgets (as in Exhibit 21.12) for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.
3.Compute the direct materials cost variance, including its price and quantity variances.
4.Compute the direct labor cost variance, including its rate and efficiency variances.
5.Prepare a detailed overhead variance report (as in Exhibit 21.16) that shows the variances for individual items of overhead.
