Antuan Company set the following standard costs per unit for its product. Direct materials (5.0 pounds @ $6.00 per pound) $ 30.00 Direct labor (1.9 hours @ $11.00 per hour) 20.90 Overhead (1.9 hours @ $18.50 per hour) 35.15 Standard cost per unit $ 86.05 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 $ 30,000 Indirect labor 75,000 Power 30,000 Maintenance 30,000 Total variable overhead costs 165,000 Fixed overhead costs Depreciation—Building 24,000 Depreciation—Machinery 70,000 Taxes and insurance 18,000 Supervisory salaries 250,250 Total fixed overhead costs 362,250 Total overhead costs $ 527,250 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (76,000 pounds @ $6.10 per pound) $ 463,600 Direct labor (19,000 hours @ $11.20 per hour) 212,800 Overhead costs Indirect materials $ 41,950 Indirect labor 176,200 Power 34,500 Maintenance 34,500 Depreciation—Building 24,000 Depreciation—Machinery 94,500 Taxes and insurance 16,200 Supervisory salaries 250,250 672,100 Total costs $ 1,348,500 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 @ $6.00 per pound)	$ 30.00
Direct labor (1.9 hours @ $11.00 per hour)	20.90
Overhead (1.9 hours @ $18.50 per hour)	35.15
Standard cost per unit	$ 86.05

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	$ 30,000
Indirect labor	75,000
Power	30,000
Maintenance	30,000
Total variable overhead costs	165,000
Fixed overhead costs
Depreciation—Building	24,000
Depreciation—Machinery	70,000
Taxes and insurance	18,000
Supervisory salaries	250,250
Total fixed overhead costs	362,250
Total overhead costs	$ 527,250

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

Direct materials (76,000 pounds @ $6.10 per pound)		$ 463,600
Direct labor (19,000 hours @ $11.20 per hour)		212,800
Overhead costs
Indirect materials	$ 41,950
Indirect labor	176,200
Power	34,500
Maintenance	34,500
Depreciation—Building	24,000
Depreciation—Machinery	94,500
Taxes and insurance	16,200
Supervisory salaries	250,250	672,100
Total costs		$ 1,348,500

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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