Problem 08-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO...

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Accounting

Problem 08-3A Flexible budget preparation; computation ofmaterials, labor, and overhead variances; and overhead variancereport LO P1, P2, P3, P4
[The following information applies to the questionsdisplayed below.]

Antuan Company set the following standard costs for one unit of itsproduct.
Direct materials (4.0 Ibs. @ $6.00 per Ib.) $ 24.00
Direct labor (1.9 hrs. @ $12.00 per hr.) 22.80
Overhead (1.9 hrs. @ $18.50 per hr.) 35.15
Total standard cost $ 81.95

The predetermined overhead rate ($18.50 per direct labor hour) isbased on an expected volume of 75% of the factory’s capacity of20,000 units per month. Following are the company’s budgetedoverhead 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 24,000
Depreciation—Machinery 72,000
Taxes and insurance 17,000
Supervision 279,250
Total fixed overhead costs 392,250
Total overhead costs $ 527,250

The company incurred the following actual costs when it operated at75% of capacity in October.
Direct materials (61,500 Ibs. @ $6.10 per lb.) $ 375,150
Direct labor (19,000 hrs. @ $12.10 per hr.) 229,900
Overhead costs
Indirect materials $ 41,300
Indirect labor 176,050
Power 17,250
Repairs and maintenance 34,500
Depreciation—Building 24,000
Depreciation—Machinery 97,200
Taxes and insurance 15,300
Supervision 279,250 684,850
Total costs $ 1,289,900
Required:
1&2. Prepare flexible overhead budgets forOctober showing the amounts of each variable and fixed cost at the65%, 75%, and 85% capacity levels and classify all items listed inthe fixed budget as variable or fixed.
3. Compute the direct materials cost variance,including its price and quantity variances. (Indicate theeffect of each variance by selecting for favorable, unfavorable,and No variance.)
Compute the direct labor cost variance, including its rate andefficiency variances. (Indicate the effect of each varianceby selecting for favorable, unfavorable, and No variance. Round"Rate per hour" answers to two decimal places.)
Prepare a detailed overhead variance report that shows thevariances for individual items of overhead. (Indicate theeffect of each variance by selecting for favorable, unfavorable,and No variance.)

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Solution 1 2 Antuan company Flexible Overhead Budget For month ended Oct 31 Particulars Flexible Budget Flexible Budget for Variable amount per unit Total fixed cost 65 of capacity 75 of capacity 85 of capacity Sales In units 13000 15000 17000 Variable overhead costs Indirect materials 100 1300000 1500000 1700000 Indirect labor 500 6500000 7500000 8500000 Power 100 1300000 1500000 1700000 Repairs and maintenance 200 2600000 3000000 3400000 Total variable costs 900 11700000 13500000 See Answer

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Direct materials (4.0 Ibs. @ $6.00 per Ib.)	$	24.00
Direct labor (1.9 hrs. @ $12.00 per hr.)		22.80
Overhead (1.9 hrs. @ $18.50 per hr.)		35.15
Total standard cost	$	81.95

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		24,000
Depreciation—Machinery		72,000
Taxes and insurance		17,000
Supervision		279,250
Total fixed overhead costs				392,250
Total overhead costs			$	527,250


Direct materials (61,500 Ibs. @ $6.10 per lb.)			$	375,150
Direct labor (19,000 hrs. @ $12.10 per hr.)				229,900
Overhead costs
Indirect materials	$	41,300
Indirect labor		176,050
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		97,200
Taxes and insurance		15,300
Supervision		279,250		684,850
Total costs			$	1,289,900
Required: 1&2. Prepare flexible overhead budgets forOctober showing the amounts of each variable and fixed cost at the65%, 75%, and 85% capacity levels and classify all items listed inthe fixed budget as variable or fixed. 3. Compute the direct materials cost variance,including its price and quantity variances. (Indicate theeffect of each variance by selecting for favorable, unfavorable,and No variance.) Compute the direct labor cost variance, including its rate andefficiency variances. (Indicate the effect of each varianceby selecting for favorable, unfavorable, and No variance. Round"Rate per hour" answers to two decimal places.) Prepare a detailed overhead variance report that shows thevariances for individual items of overhead. (Indicate theeffect of each variance by selecting for favorable, unfavorable,and No variance.)