Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $5.00 per Ib.) $ 20.00 Direct labor (1.9 hrs. @ $12.00 per hr.) 22.80 Overhead (1.9 hrs. @ $18.50 per hr.) 35.15 Total standard cost $ 77.95 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 25,000 Depreciation—Machinery 71,000 Taxes and insurance 17,000 Supervision 279,250 Total fixed overhead costs 392,250 Total overhead costs $ 527,250 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (61,500 Ibs. @ $5.10 per lb.) $ 313,650 Direct labor (23,000 hrs. @ $12.30 per hr.) 282,900 Overhead costs Indirect materials $ 41,000 Indirect labor 176,800 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 25,000 Depreciation—Machinery 95,850 Taxes and insurance 15,300 Supervision 279,250 684,950 Total costs $ 1,281,500.

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

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	15000	41000	26000	Unfavorable
Indirect labor	75000	176800	101800	Unfavorable
Power	15000	17250	2250	Unfavorable
Repairs and maintenance	30000	34500	4500	Unfavorable
Total variable costs	135000	269550	134550	Unfavorable
Fixed costs
Depreciation—Building	25000	25000	0	No variance
Depreciation—Machinery	71000	95850	24850	Unfavorable
Taxes and insurance	17000	15300	1700	Favorable
Supervision	279250	279250	0	No variance
Total fixed costs	392250	415400	23150	Unfavorable
Total overhead costs	527250	684950	157700	Unfavorable