Question

[The following information applies to the questions displayed below.] Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $4.00 per Ib.) $ 16.00 Direct labor (1.7 hrs. @ $13.00 per hr.) 22.10 Overhead (1.7 hrs. @ $18.50 per hr.) 31.45 Total standard cost $ 69.55 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 $ 15,000 Indirect labor 75,000 Power 15,000 Repairs and maintenance 45,000 Total variable overhead costs $ 150,000 Fixed overhead costs Depreciation—Building 24,000 Depreciation—Machinery 71,000 Taxes and insurance 17,000 Supervision 209,750 Total fixed overhead costs 321,750 Total overhead costs $ 471,750 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (60,500 Ibs. @ $4.20 per lb.) $ 254,100 Direct labor (22,000 hrs. @ $13.20 per hr.) 290,400 Overhead costs Indirect materials $ 41,350 Indirect labor 176,700 Power 17,250 Repairs and maintenance 51,750 Depreciation—Building 24,000 Depreciation—Machinery 95,850 Taxes and insurance 15,300 Supervision 209,750 631,950 Total costs $ 1,176,450 rev: 03_28_2018_QC_CS-122864 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.

Answer 1

Antuan company
Flexible Overhead budget
	Per unit	65 % capacity	75 % capacity	85 % capacity
		20000 * 65 %	20000 * 75 %	20000 * 85 %
Units		13000	15000	17000
VOH costs
Indirect material	15000 / 20000 * 75 % = 1	13000	15000	17000
Indirect labor	75000 / 15000 = 5	65000	75000	85000
Power	15000 / 20000 * 75 % = 1	13000	15000	17000
R and M	45000 / 20000 * 75 % = 3	39000	45000	51000
Total VOH costs		130000	150000	170000
FOH costs
Dep. - Building		24000	24000	24000
Dep. - Machinery		71000	71000	71000
Taxes and Ins.		17000	17000	17000
Supervision		209750	209750	209750
Total FOH costs		321750	321750	321750
Total OH costs		451750	471750	491750