Question
Antuan Company set the following standard costs per unit for its product. Direct materials (3.0 pounds @ $4.00 per pound) $ 12.00 Direct labor (1.8
Antuan Company set the following standard costs per unit for its product.
Direct materials (3.0 pounds @ $4.00 per pound) | $ 12.00 |
---|---|
Direct labor (1.8 hours @ $12.00 per hour) | 21.60 |
Overhead (1.8 hours @ $18.50 per hour) | 33.30 |
Standard cost per unit | $ 66.90 |
The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level 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 | $ 30,000 |
Indirect labor | 75,000 |
Power | 30,000 |
Maintenance | 30,000 |
Total variable overhead costs | 165,000 |
Fixed overhead costs | |
DepreciationBuilding | 24,000 |
DepreciationMachinery | 71,000 |
Taxes and insurance | 17,000 |
Supervisory salaries | 222,500 |
Total fixed overhead costs | 334,500 |
Total overhead costs | $ 499,500 |
The company incurred the following actual costs when it operated at 75% of capacity in October.
Direct materials (46,000 pounds @ $4.20 per pound) | $ 193,200 | |
---|---|---|
Direct labor (22,000 hours @ $12.20 per hour) | 268,400 | |
Overhead costs | ||
Indirect materials | $ 41,850 | |
Indirect labor | 176,500 | |
Power | 34,500 | |
Maintenance | 34,500 | |
DepreciationBuilding | 24,000 | |
DepreciationMachinery | 95,850 | |
Taxes and insurance | 15,300 | |
Supervisory salaries | 222,500 | 645,000 |
Total costs | $ 1,106,600 |
2. Compute the direct materials variance, including its price and quantity variances. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.)
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