Direct materials (5.0 Ibs. @ $5.00 per Ib.) Direct labor (2.0 hrs. @ $13.00 per hr.) Overhead (2.0 hrs. @ $18.50 per hr.) Total standard cost $25.00 26.00 37.00 $88.00 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 (754 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 70,000 Taxes and insurance 17,000 Supervision 308, eee Total fixed overhead costs 420,000 Total overhead costs 5555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. $ 392,600 248,900 Direct materials (75,500 lbs. $5.20 per lb.) Direct labor (19,000 hrs. $13.10 per hr.) Overhead costs Indirect materials Indirect labor Power Repairs and maintenance Depreciation-Building Depreciation Machinery Taxes and insurance Supervision Total costs $41,800 176,300 17,250 34,500 25,000 94,500 15,300 388,000 712,650 $1,354, 150 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. ANTUAN COMPANY Flexible Overhead Budgets For Month Ended October 31 Flexible Budget Flexible Budget for Variable Total Fixed 65% of 75% of 85% of Amount per Unit Cost capacity capacity capacity Sales (in units) Variable overhead costs Fixed overhead costs Total Overhead costs 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.) Actual Cont Standard Coat 4. Compute the direct labor cost variance, including its rate and efficiency variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance. Round "Rate per hour answers to two decimal places.) Actual Cont Standard Coat 5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.) ANTUAN COMPANY Overhead Variance Report For Month Ended October 31 Expected production volume Production level achieved Volume variance Flexible Budget Actual Results Variances Fav./Unfav. Variable costs Fixed costs Total overhead costs
