Question

Antuan Company set the following standard costs for one unit of its product.

Direct materials (3.0 Ibs. @ $5.00 per Ib.)	$	15.00
Direct labor (2.0 hrs. @ $11.00 per hr.)		22.00
Overhead (2.0 hrs. @ $18.50 per hr.)		37.00
Total standard cost	$	74.00

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		30,000
Total variable overhead costs				$	135,000
Fixed overhead costs
Depreciation—Building		23,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		309,000
Total fixed overhead costs					420,000
Total overhead costs				$	555,000

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (46,500 Ibs. @ $5.10 per lb.)				$	237,150
Direct labor (23,000 hrs. @ $11.30 per hr.)					259,900
Overhead costs
Indirect materials	$	41,800
Indirect labor		176,850
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		309,000			713,550
Total costs				$	1,210,600

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