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Homework: Flexible Budgets Assignment

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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 $ 15,000
Indirect labor 75,000
Power 15,000
Maintenance 30,000
Total variable overhead costs 135,000
Fixed overhead costs
DepreciationBuilding 25,000
DepreciationMachinery 72,000
Taxes and insurance 18,000
Supervisory salaries 249,500
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 (60,500 pounds @ $6.10 per pound) $ 369,050
Direct labor (22,000 hours @ $12.10 per hour) 266,200
Overhead costs
Indirect materials $ 41,500
Indirect labor 176,100
Power 17,250
Maintenance 34,500
DepreciationBuilding 25,000
DepreciationMachinery 97,200
Taxes and insurance 16,200
Supervisory salaries 249,500 657,250
Total costs $ 1,292,500

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

Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.

image text in transcribed 2. Compute the direct materlals varlance, Including its price and quantity varlances. Note: Inclcate the effect of each varlance by selecting favorable, unfavorable, or no varlance. 2. Compute the direct materlals varlance, Including its price and quantity varlances. Note: Inclcate the effect of each varlance by selecting favorable, unfavorable, or no varlance

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