Problem 8-3A Flexible budget preparation; computation of materials, labor, and o
ID: 2558797 • Letter: P
Question
Problem 8-3A Flexible budget preparation; computation of materials, labor, and overhea The following information epplies to the questions displayed below Antuan Company set the following standard costs for one unit of its product Direct materials (5.0 lbs.$5.00 per lb.) 25.00 Direct labor (1.9 hrs. $13.00 per ht) Overheed (1.9 hrs.$18.50 per hr) 2470 35.15 Total standard cost $ 8485 The predetermined overhead rate ($18 50 per drea labor hour) is based on an expected volume of 75% of the factory's capacty of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Ca paty) Variable overhead costs Indirect materials Indirect labor Power Repairs and maintenance $ 15,000 75.000 15,000 30,000 Total varleble overhead costs 135,000 Fixed overhead costs Depreaation-building Depreaation-machinery Toxes andinsurance Supervision 24,000 71,000 16,000 281.250 Total fixed overheed costs 392.250 Total overhead costs $527.250Explanation / Answer
1 &2. Flexible Overhead budget for October 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 Cost Indirect Materials $1 $13,000 $15,000 $17,000 Indirect labour $5 $65,000 $75,000 $85,000 Power $1 $13,000 $15,000 $17,000 Repair & maintenance $2 $26,000 $30,000 $34,000 Total Variable cost $9 $117,000 $135,000 $153,000 Fixed Overhead Cost Depreciation Building $24,000 $24,000 $24,000 $24,000 Depreciation-machinery $71,000 $71,000 $71,000 $71,000 Taxes and Insurance $16,000 $16,000 $16,000 $16,000 Supervision $281,250 $281,250 $281,250 $281,250 Total Fixed costs $392,250 $392,250 $392,250 $392,250 Total Overhead cost $509,250 $527,250 $545,250 Note: Variable Cost per unit Indirect Materials = $15000/15000 units = $1 per unit Indirect labour = $75000/15000 units = $5 per unit Power = $15000/15000 units = $1 per unit Repair & maintenance = $30000/15000 units = $2 per unit 3. Direct Material Cost Variance, including its price and quantity variance Actual Quantity at Actual Price 76000 lbs x $5.10 per lbs $387,600 Actual Quantity at Standard Price 76000 lbs x $5 per lbs $380,000 Standard Quantity at Standard Price 75000 lbs x $5 per lbs $375,000 Direct Material Price Variance = $387600 - $380000 = $7600 Unfavourable Direct Material Quantity Variance = $380000 - $375000 = $5000 Unfavourable Direct Material Variance = $7600 + $5000 = $12600 Unfavourable 4. Direct labour Cost Variance, including its rate and efficiency variance Actual hour at Actual rate 28000 hrs x $13.40 per hr $375,200 Actual hour at Standard rate 28000 hrs x $13 per hr $364,000 Standard hour at Standard rate 28500 hrs x $13 per hr $370,500 Direct labour rate variance = $375200 - $364000 = $11200 Unfavourable Direct labour efficiency variance = $364000 - $370500 = $6500 favourable Direct labour cost Variance = $11200 - $6500 = $4700 Unfavourable 5. Detailed Overhead Variance Report Expected Production Volume 75% of Capacity Production Level Achieved 75% of Capacity Volume Varaince No variance Flexible Budget Actual Results Variances Fav./Unfav. Variable Overhead Cost Indirect Materials $15,000 $41,600 $26,600 Unfav Indirect labour $75,000 $176,750 $101,750 Unfav Power $15,000 $17,250 $2,250 Unfav Repair & maintenance $30,000 $34,500 $4,500 Unfav Total Variable cost $135,000 $270,100 $135,100 Unfav Fixed Overhead Cost Depreciation Building $24,000 $24,000 $0 No variance Depreciation-machinery $71,000 $95,850 $24,850 Unfav Taxes and Insurance $16,000 $14,400 $1,600 Fav Supervision $281,250 $281,250 $0 No variance Total Fixed costs $392,250 $415,500 $23,250 Unfav Total Overhead cost $527,250 $685,600 $158,350 Unfav