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

Direct materials (6 lbs. @ $5 per lb.). $ 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 factorys capacity of 20,000 units per month. Following are the companys 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 lbs @ $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

Required

1. Examine the monthly overhead budget to (a) determine the costs per unit for each variable overhead item and its total per unit costs, and (b) identify the total fixed costs per month.

2. Prepare flexible overhead budgets (as in Exhibit 21.12) for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.

3. Compute the direct materials cost variance, including its price and quantity variances.

4. Compute the direct labor cost variance, including its rate and efficiency variances.

5. Prepare a detailed overhead variance report (as in Exhibit 21.15) that shows the variances for individual items of overhead.

Exhibit 21.12:

Exhibit 21.15

Flexible overhead Budgets For Month Ended May 31, 2015 Flexible Budget Variable Total Flexible Budget at Capacity Level of Amount Fixed 100% per Unit Cost 3,500 4,000 4,500 5000 I unit Production (in units) Factory overhead Variable costs $I 400 $1,600 $1,800 $2,000 Indirect labor $0.40/unit 1,350 1,200 1,050 0.30/unit Indirect materials 900 I,000 800 0.20/unit Power and lights 350 400 450 500. 0.10/unit Maintenance 4,000 4.500 5.000 3,500 Total variable overhead costs 00/unit Fixed costs (per month) 1.000 1.000 1.000 I,000 Building rent $I,000 200 I 200 I,200 1.200 I 200 Depreciation machinery I 1.800 -1800 I,800 I,800 -1800 Supervisory salaries. Total fixed overhead costs 4,000 4,000 Total factory overhead $7.500 8,000 8,500 $9000 Standard direct labor hours I hr/unit. 3,500 hrs, 4,000 hrs. 4,500 hrs. 5,000 hrs. Predetermined overhead rate per standard direct labor hour 2.00