Question

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

Direct materials (3.0 Ibs. @ $6.00 per Ib.)	$	18.00
Direct labor (1.8 hrs. @ $11.00 per hr.)		19.80
Overhead (1.8 hrs. @ $18.50 per hr.)		33.30
Total standard cost	$	71.10

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				$	135,000
Fixed overhead costs
Depreciation—Building		23,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		253,500
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 (46,000 Ibs. @ $6.10 per lb.)				$	280,600
Direct labor (20,000 hrs. @ $11.40 per hr.)					228,000
Overhead costs
Indirect materials	$	41,150
Indirect labor		176,450
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		253,500			657,000
Total costs				$	1,165,600

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 Cost Standard Cost $ 0 $

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.)

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.)

Answer 1

3
Actual Cost								Standard Cost
AQ	x	AP		AQ	x	SP		SQ	x	SP
46,000	x	6.10		46,000	x	$6.00		45,000	x	$6.00
	280600				276000				270000
			4600				6000
Direct materials price variance				4600	Unfavorable
Direct materials quantity variance				6000	Unfavorable
Total direct materials variance				10600	Unfavorable
4
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
20,000	x	$11.40		20,000	x	$11.00		27,000	x	$11.00
	228000				220000				297000
			8000				77000
Direct labor rate variance				8000	Unfavorable
Direct labor efficiency variance				77000	Favorable
Total direct labor variance				69000	Favorable

5
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Expected production volume	75% of capacity
Production level achieved	75% of capacity
Volume variance	No variance
	Flexible Budget	Actual Results	Variances	Fav. / Unfav.
Variable costs
Indirect materials	15,000	41,150	26,150	Unfavorable
Indirect labor	75,000	176,450	101,450	Unfavorable
Power	15,000	17,250	2,250	Unfavorable
Repairs and maintenance	30,000	34,500	4,500	Unfavorable
Total variable costs	135000	269350	134,350	Unfavorable
Fixed costs
Depreciation—Building	23,000	23,000	0	No variance
Depreciation—Machinery	71,000	95,850	24,850	Unfavorable
Taxes and insurance	17,000	15,300	1,700	Favorable
Supervision	253,500	253,500	0	No variance
Total fixed costs	364500	387650	23,150	Unfavorable
Total overhead costs	499500	657000	157,500	Unfavorable