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

Required information

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 (6 Ibs. @ $5 per Ib.) $ 30
Direct labor (2 hrs. @ $17 per hr.) 34
Overhead (2 hrs. @ $18.50 per hr.) 37
Total standard cost $ 101

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 $ 45,000
Indirect labor 180,000
Power 45,000
Repairs and maintenance 90,000
Total variable overhead costs $ 360,000
Fixed overhead costs
DepreciationBuilding 24,000
DepreciationMachinery 80,000
Taxes and insurance 12,000
Supervision 79,000
Total fixed overhead costs 195,000
Total overhead costs $ 555,000

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

Direct materials (91,000 Ibs. @ $5.10 per lb.) $ 464,100
Direct labor (30,500 hrs. @ $17.25 per hr.) 526,125
Overhead costs
Indirect materials $ 44,250
Indirect labor 177,750
Power 43,000
Repairs and maintenance 96,000
DepreciationBuilding 24,000
DepreciationMachinery 75,000
Taxes and insurance 11,500
Supervision 89,000 560,500
Total costs $ 1,550,725

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. AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price 4. Compute the direct labor cost variance, including its rate and efficiency variances. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate

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

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