Antuan Company set the following standard costs per unit for its product. Direct materials (5.0 pounds @ $5.00 per pound) $ 25.00 Direct labor (1.6 hours @ $13.00 per hour) 20.80 Overhead (1.6 hours @ $18.50 per hour) 29.60 Standard cost per unit $ 75.40 The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level 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 90,000 Power 15,000 Maintenance 30,000 Total variable overhead costs 150,000 Fixed overhead costs Depreciation—Building 24,000 Depreciation—Machinery 70,000 Taxes and insurance 17,000 Supervisory salaries 183,000 Total fixed overhead costs 294,000 Total overhead costs $ 444,000 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (76,500 pounds @ $5.10 per pound) $ 390,150 Direct labor (19,000 hours @ $13.30 per hour) 252,700 Overhead costs Indirect materials $ 41,450 Indirect labor 176,450 Power 17,250 Maintenance 34,500 Depreciation—Building 24,000 Depreciation—Machinery 94,500 Taxes and insurance 15,300 Supervisory salaries 183,000 586,450 Total costs $ 1,229,300 Required: 1. Prepare flexible overhead budgets for October showing amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Antuan Company set the following standard costs per unit for its product.

Direct materials (5.0 pounds @ $5.00 per pound)	$ 25.00
Direct labor (1.6 hours @ $13.00 per hour)	20.80
Overhead (1.6 hours @ $18.50 per hour)	29.60
Standard cost per unit	$ 75.40

The standard overhead rate ($18.50 per direct labor hour) is based on a predicted activity level 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	90,000
Power	15,000
Maintenance	30,000
Total variable overhead costs	150,000
Fixed overhead costs
Depreciation—Building	24,000
Depreciation—Machinery	70,000
Taxes and insurance	17,000
Supervisory salaries	183,000
Total fixed overhead costs	294,000
Total overhead costs	$ 444,000

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (76,500 pounds @ $5.10 per pound)		$ 390,150
Direct labor (19,000 hours @ $13.30 per hour)		252,700
Overhead costs
Indirect materials	$ 41,450
Indirect labor	176,450
Power	17,250
Maintenance	34,500
Depreciation—Building	24,000
Depreciation—Machinery	94,500
Taxes and insurance	15,300
Supervisory salaries	183,000	586,450
Total costs		$ 1,229,300

Required:
1. Prepare flexible overhead budgets for October showing amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.

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