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. |
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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