Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (6...

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

5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.

Homework Answers

Answer #1
ANTUAN COMPANY
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.
Variable costs
Indirect materials 45,000 44,250 750 Favorable
Indirect labor 180,000 177,750 2,250 Favorable
Power 45,000 43,000 2,000 Favorable
Repairs and maintenance 90,000 96,000 6,000 Unfavorable
Total variable costs 360000 361000 1,000 Unfavorable
Fixed costs
Depreciation—Building 24,000 24,000 0 No variance
Depreciation—Machinery 80,000 75,000 5,000 Favorable
Taxes and insurance 12,000 11,500 500 Favorable
Supervision 79,000 89,000 10,000 Unfavorable
Total fixed costs 195000 199500 4,500 Unfavorable
Total overhead costs 555000 560500 5,500 Unfavorable
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