Question

9)

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