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Problem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, C2 [The following information applies

Problem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, C2

[The following information applies to the questions displayed below.]

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

Direct materials (5.0 Ibs. @ $5.00 per Ib.) $ 25.00
Direct labor (1.6 hrs. @ $12.00 per hr.) 19.20
Overhead (1.6 hrs. @ $18.50 per hr.) 29.60
Total standard cost $ 73.80

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 72,000
Taxes and insurance 17,000
Supervision 197,000
Total fixed overhead costs 309,000
Total overhead costs $ 444,000

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (76,500 Ibs. @ $5.20 per lb.) $ 397,800
Direct labor (29,000 hrs. @ $12.30 per hr.) 356,700
Overhead costs
Indirect materials $ 41,800
Indirect labor 176,900
Power 17,250
Repairs and maintenance 34,500
Depreciationbuilding 23,000
Depreciationmachinery 97,200
Taxes and insurance 15,300
Supervision 197,000 602,950
Total costs $ 1,357,450

References

Section BreakProblem 21-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, C2

Problem 21-3A Part 1&2

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.

Problem 21-3A Part 3

3.

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

Problem 21-3A Part 4

4.

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

Problem 21-3A Part 5

5.

Prepare a detailed overhead variance report that shows the variances for individual items of overhead.

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