[The following information applies to the questions displayed below.] Antuan Com

Question

[The following information applies to the questions displayed below.] Antuan Company set the following standard costs for one unit of its product. Direct materials (3.0 Ibs. @ $5.00 per Ib.) $ 15.00 Direct labor (2.0 hrs. @ $13.00 per hr.) 26.00 Overhead (2.0 hrs. @ $18.50 per hr.) 37.00 Total standard cost $ 78.00 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 18,000 Supervision 309,000 Total fixed overhead costs 420,000 Total overhead costs $ 555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (46,000 Ibs. @ $5.20 per lb.) $ 239,200 Direct labor (29,000 hrs. @ $13.20 per hr.) 382,800 Overhead costs Indirect materials $ 41,800 Indirect labor 176,950 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 23,000 Depreciation—Machinery 94,500 Taxes and insurance 16,200 Supervision 309,000 713,200 Total costs $ 1,335,200 Required: 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.

Explanation / Answer

ANTUAN COMPANY Flexible Overhead Budgets For Month Ended October 31 Flexible Budget Flexible Budget for Variable Amount per Unit Total Fixed Cost 65% of capacity 75% of capacity 85% of capacity Sales (in units) 13,000 15,000 17,000 Variable costs Indirect materials $1.00 13,000 15,000 17,000 Indirect labor $5.00 65,000 75,000 85,000 Power $1.00 13,000 15,000 17,000 Repairs and maintenance $2.00 26,000 30,000 34,000 Total variable costs 9 117000 135000 153000 Fixed costs Depreciation—Building $23,000 $23,000 $23,000 $23,000 Depreciation—Machinery 70,000 70,000 70,000 70,000 Taxes and insurance 18,000 18,000 18,000 18,000 Supervision 309,000 309,000 309,000 309,000 Total fixed costs 420000 420000 420000 420000 Total overhead costs $537,000 $555,000 $573,000

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