Antaean Company set the following standard costs for one unit of its product.
Direct materials 6lbs. @5 dollars per lb. $30
Direct labor 2 hours @ $17 per hour $34
Overhead 2 hours @$18.50 per hour $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 factory's capacity of 20000 units per month. Following are company's budgeted overhead costs per month at the 75% level.
Overhead budget (75% capacity)
Variable overhead costs
Indirect materials--------------$45000
Indirect labor--------------------180000
Power---------------------------45000
Repairs and maintenance----90000
Total variable overhead costs===$360000
Fixed overhead costs
Depreciation-building--------24000
Depreciation-machinery------80000
Taxes and insurance-----------12000
Supervision----------------------79000
Total fixed overhead costs ===195000
Total overhead costs=================$555000
The company incurred the following actual costs when it operated at 75% of capacity in October
Direct materials (91000lbs @$5.10 per lb)---------------$464100
Direct labor (30500 hrs. @$17.25 per hour) -------------526125
Overhead costs
Indirect materials------------$44250
Indirect labor-----------177750
Power------------------43000
Repairs and maintence----96000
Dep-building--------24000
Dep-machinery------75000
Taxes and insurance----11500
Supervision------89000
Total overhead-----560500
Total costs-------------------------------$555000
Required
1) Examine the monthly overhead budget to (A) determine the costs per unit for each variable overhead item and its total per unit costs, and (B) identify the total fixed costs per month.
2) Prepare flexible overhead budgets for October showing the amount of each variable and fixed cost at the 65% , 75%, and 85% capacity levels.
3) Compute the direct materials cost variance, including its price and quantity variances
4) Compute the direct labor cost variance, including its rate and efficiency variances
5) Prepare a detailed overhead variance report that shows the variances for individual items of overhead.