Question


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




Direct materials (5.0 Ibs. @ $5.00 per Ib.)$25.00
Direct labor (1.8 hrs. @ $13.00 per hr.)
23.40
Overhead (1.8 hrs. @ $18.50 per hr.)
33.30
Total standard cost$81.70


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
24,000


Depreciation—Machinery
71,000


Taxes and insurance
17,000


Supervision
252,500


Total fixed overhead costs



364,500
Total overhead costs


$499,500


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







Direct materials (76,500 Ibs. @ $5.20 per lb.)


$397,800
Direct labor (19,000 hrs. @ $13.30 per hr.)



252,700
Overhead costs




Indirect materials$41,650


Indirect labor
176,800


Power
17,250


Repairs and maintenance
34,500


Depreciation—Building
24,000


Depreciation—Machinery
95,850


Taxes and insurance
15,300


Supervision
252,500

657,850
Total costs


$1,308,350

rev: 04_27_2020_QC_CS-209738

3. Compute the direct materials cost variance, including its price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.)

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