Question

Required information {The following information applies to the questions displayed below. Antuan Company set the following standard costs for one unit of its product Direct materials (3.Ibs. @ $4.00 per Ib.) Direct labor (1.7 hrs. @ $13.00 per hr.) Overhead (1.7 hrs. @ $18.50 per hr.) Total standard cost $12.00 22.10 31.45 $65.55 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 (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 Fixed overhead costs Depreciation-Building 23,000 Depreciation Machinery 71,020 Taxes and insurance 18,000 Supervision 224,750 Total fixed overhead costs Total overhead costs $135,000 336,750 $471,750 The company incurred the following actual costs when it operated at 75% of capacity in October. $ 188,600 266,000 Direct materials (46,200 lbs. $4.10 per lb.) Direct labor (20,000 hrs. @ $13.30 per hr.) Overhead costs Indirect materials Indirect labor Power Repairs and maintenance Depreciation-Building Depreciation Machinery Taxes and insurance Supervision Total costs $ 41,550 176,300 17,250 34,500 23,000 95,850 16,200 224,750 629,400 $1,084,000

Answer 1

1 & 2 Flexible Overhead Budget Antuan Company Flexible Overhead Budget For month Ended October 31 Flexible Budget Flexible Budget at Variable cost per Unit Fixed Cost 65% of Capacity 75% of Capacity 85% of Capacity 13000 15000 17000 1.00 5.00 1.00 2.00 9.00 $ $ $ 13,000 65,000 13,000 26,000 117,000 $ $ $ $ $ 15,000 75,000 15,000 30,000 135,000 $ $ $ $ $ 17,000 85,000 17,000 34,000 153,000 $ Sales in units Variable Cost: Indirect Material Indirect Labor Power Repairs & Maintenance Total Variable Cost Fixed Cost : Depreciation - Building Depreciation - Machinery Taxes and Insurance Supervision Total Fixed Cost Total Overhead Cost 23,000 71,000 18,000 224,750 336,750 $ $ $ $ $ $ 23,000 $ 71,000 $ 18,000 $ 224,750 $ 336,750 $ 453,750 $ 23,000 $ 71,000 $ 18,000 $ 224,750 $ 336,750 $ 471,750 $ 23,000 71,000 18,000 224,750 336,750 489,750 $ Variable cost per Unit 65% of Capacity 75% of Capacity 85% of Capacity 20000*65% 20000*75% 20000*85% Sales in units Variable Cost: Indirect Material Indirect Labor Power Repairs & Maintenance 15000/15000 75000/15000 15000/15000 30000/15000 1 x 13000 5 x 13000 1x 13000 2 x 13000 1 x 15000 5x 15000 1 x 15000 2 x 15000 1 x 17000 5x 17000 1x 17000 12x 17000 Fixed cost remain same at all level of activity.

3.Direct Material cost variance including its price and quantity variance Actual Cost AQT X TAP 46000 $ 4.10 Flexible X SP AQ 46000 Standard Cost SQ XT SP 45000 $ 4.00 $ 4.00 $ 188,600 S 184.000 $180,000 $ 4,600 $ 4.000 Price Variance Quantity Variance Total Direct Material cost variance $ $ $ 4,600 4,000 8,600 Unfavorable Unfavorable Unfavorable Standard Quantity= number of units X lbs per unit Here number of units are 15000 units standard Ibs per unit is 3.00 so total standard quantity is 15000 X 3.00=45000 lbs Price variance = actual cost - standard price at actual quantity (flexible cost) Quantity variance = standard price at actual quantity (flexible cost) - Standard price at standard quantity Price variance is favorable when actual cost incurred is less than standard cost at actual hours, and unfavorable when actual cost incurred is more than standard cost at actual Qty. Quanity variance is favorable when actual quantity used is less than budgeted quantity, and unfavorable when actual quantity used is more than budgeted quantty. 4.Direct labor cost variance including its rate and efficiency variance Actual Cost AH X 20000 Flexible X AR 13.30 AH 20000 SR 13.00 Standard Cost SH X 25500 $ SR 13.00 $ $ $ 266,000 $ 260,000 $331,500 $ 6,000 $ 71,500 Direct Labor rate Variance Direct Labor efficiency Variance Total Direct labor cost variance $ $ $ 6,000 71,500 65,500 Unfavorable favorable favorable Standard hours = number of units X hours per unit Here number of units are 15000 units standard hours per unit is 1.70 so total standard hours is 15000 X 1.70=25500 hours Rate variance = actual cost - standard rate at actual hours Efficiency variance = standard rate at actual hours - Standard rate at standard hours Rate variance is favourable when actual cost incurred is less than standard cost at actual hours, and unfavourable when actual cost incurred is more than standard cost at actual hours. Efficiency variance is favourable when actual hours used are less than budgeted hours, and unfavourable when actual hours used are more than budgeted hours.

5. Detailed Overhead Variance Report Expected Production Volume Production Level achieved Volume Variance Antuan Company Overhead Variance Report For month Ended October 31 75% of capacity 75% of capacity No Variance Flexible Budget Actual Results Varaince Fav/Unfav 15,000 75,000 15,000 30,000 135,000 $ $ $ $ $ 41,550 $ 176,300 $ 17,250 $ 34,500 $ 269,600 $ 26,550 Unfavorable 101,300 Unfavorable 2,250 Unfavorable 4,500 Unfavorable 134,600 Unfavorable Variable Cost: Indirect Material Indirect Labor Power Repairs & Maintenance Total Variable Cost Fixed Cost: Depreciation - Building Depreciation - Machinery Taxes and Insurance Supervision Total Fixed Cost Total Overhead Cost $ $ $ $ 23,000 $ 71,000 $ 18,000 $ 224,750 $ 336,750 $ 471,750 $ 23,000 $ 95,850 $ 16,200 $ 224,750 $ 359,800 $ 629,400 $ - No variance 24,850 Unfavorable 1,800 favorable - No variance 23,050 Unfavorable 157,650 Unfavorable