Antuan Company set the following standard costs for one unit of
|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 ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level.
|Overhead Budget (75% Capacity)|
|Variable overhead costs|
|Repairs and maintenance||90,000|
|Total variable overhead costs||$||360,000|
|Fixed overhead costs|
|Taxes and insurance||12,000|
|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|
|Repairs and maintenance||96,000|
|Taxes and insurance||11,500|
5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.
|Overhead Variance Report|
|For Month Ended October 31|
|Expected production volume||75% of capacity|
|Production level achieved||75% of capacity|
|Volume variance||No variance|
|Flexible Budget||Actual Results||Variances||Fav. / Unfav.|
|Repairs and maintenance||90,000||96,000||6,000||Unfavorable|
|Total variable costs||360000||361000||1,000||Unfavorable|
|Taxes and insurance||12,000||11,500||500||Favorable|
|Total fixed costs||195000||199500||4,500||Unfavorable|
|Total overhead costs||555000||560500||5,500||Unfavorable|
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