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Antuan Company set the following standard costs for one unit of its product
Antuan Company set the following standard costs for one unit of its product.
| Direct materials (5.0 Ibs. @ $6.00 per Ib.) | $ | 30.00 |
| Direct labor (1.7 hrs. @ $14.00 per hr.) | 23.80 | |
| Overhead (1.7 hrs. @ $18.50 per hr.) | 31.45 | |
| Total standard cost | $ | 85.25 |
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 | 70,000 | ||||
| Taxes and insurance | 17,000 | ||||
| Supervision | 226,750 | ||||
| Total fixed overhead costs | 336,750 | ||||
| Total overhead costs | $ | 471,750 | |||
The company incurred the following actual costs when it operated at 75% of capacity in October.
| Direct materials (76,000 Ibs. @ $6.20 per lb.) | $ | 471,200 | |||
| Direct labor (22,000 hrs. @ $14.10 per hr.) | 310,200 | ||||
| Overhead costs | |||||
| Indirect materials | $ | 41,250 | |||
| Indirect labor | 176,950 | ||||
| Power | 17,250 | ||||
| Repairs and maintenance | 34,500 | ||||
| Depreciation—Building | 23,000 | ||||
| Depreciation—Machinery | 94,500 | ||||
| Taxes and insurance | 15,300 | ||||
| Supervision | 226,750 | 629,500 | |||
| Total costs | $ | 1,410,900 | |||
rev: 03_28_2018_QC_CS-122864
5. Prepare a detailed overhead variance report that shows the variances for individual items of overhead.
Expert Solution
| 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 | 41,250 | 26250 | Unfavorable | co. think that spend on material 15000 but actully spend 41250 , so co spend more which they think so unfavorable . |
| Indirect labor | 75,000 | 176,950 | 101,950 | Unfavorable | |
| Power | 15,000 | 17,250 | 2250 | Unfavorable | |
| Repairs and maintenance | 30,000 | 34,500 | 4500 | Unfavorable | |
| Total variable costs | 135000 | 269950 | 134950 | Unfavorable | |
| Fixed costs | |||||
| Depreciation—Building | 23,000 | 23,000 | 0 | No variance | |
| Depreciation—Machinery | 70,000 | 94,500 | 24500 | Unfavorable | |
| Taxes and insurance | 17,000 | 15300 | 1700 | Favorable | co. think spend 17000 for taxes but actully spend by co 15300 so co spend less which they think , so favorable |
| Supervision | 226750 | 226750 | 0 | No variance | |
| Total fixed costs | 336750 | 359550 | 22800 | Unfavorable | |
| Total overhead costs | 471750 | 629500 | 157750 | Unfavorable |
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