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
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 (1.7 hrs. @ $12.00 per hr.) | 20.40 | |
Overhead (1.7 hrs. @ $18.50 per hr.) | 31.45 | |
Total standard cost | $ | 71.85 |
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 | $ | 15,000 | |||
Indirect labor | 75,000 | ||||
Power | 15,000 | ||||
Repairs and maintenance | 30,000 | ||||
Total variable overhead costs | $ | 135,000 | |||
Fixed overhead costs | |||||
DepreciationBuilding | 23,000 | ||||
DepreciationMachinery | 71,000 | ||||
Taxes and insurance | 18,000 | ||||
Supervision | 224,750 | ||||
Total fixed overhead costs | 336,750 | ||||
Total overhead costs | $ | 471,750 | |||
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 (21,000 hrs. @ $12.30 per hr.) | 258,300 | ||||
Overhead costs | |||||
Indirect materials | $ | 41,700 | |||
Indirect labor | 176,850 | ||||
Power | 17,250 | ||||
Repairs and maintenance | 34,500 | ||||
DepreciationBuilding | 23,000 | ||||
DepreciationMachinery | 95,850 | ||||
Taxes and insurance | 16,200 | ||||
Supervision | 224,750 | 630,100 | |||
Total costs | $ | 1,202,050
|
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.
3. Compute the direct materials cost variance, including its price and quantity variances. AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price
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