Required information Skip to question [The following information applies to the questions displayed below.] Antuan Company set the following standard costs per unit for its product. Direct materials (4.0 pounds @ $5.00 per pound) $ 20.00 Direct labor (1.8 hours @ $12.00 per hour) 21.60 Overhead (1.8 hours @ $18.50 per hour) 33.30 Standard cost per unit $ 74.90 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 75,000 Power 15,000 Maintenance 30,000 Total variable overhead costs 135,000 Fixed overhead costs Depreciation—Building 23,000 Depreciation—Machinery 71,000 Taxes and insurance 18,000 Supervisory salaries 252,500 Total fixed overhead costs 364,500 Total overhead costs $ 499,500 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (61,000 pounds @ $5.10 per pound) $ 311,100 Direct labor (20,000 hours @ $12.10 per hour) 242,000 Overhead costs Indirect materials $ 41,250 Indirect labor 176,800 Power 17,250 Maintenance 34,500 Depreciation—Building 23,000 Depreciation—Machinery 95,850 Taxes and insurance 16,200 Supervisory salaries 252,500 657,350 Total costs $ 1,210,450 2. Compute the direct materials variance, including its price and quantity variances. Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...

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

Direct materials (4.0 pounds @ $5.00 per pound)	$ 20.00
Direct labor (1.8 hours @ $12.00 per hour)	21.60
Overhead (1.8 hours @ $18.50 per hour)	33.30
Standard cost per unit	$ 74.90

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	75,000
Power	15,000
Maintenance	30,000
Total variable overhead costs	135,000
Fixed overhead costs
Depreciation—Building	23,000
Depreciation—Machinery	71,000
Taxes and insurance	18,000
Supervisory salaries	252,500
Total fixed overhead costs	364,500
Total overhead costs	$ 499,500

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

Direct materials (61,000 pounds @ $5.10 per pound)		$ 311,100
Direct labor (20,000 hours @ $12.10 per hour)		242,000
Overhead costs
Indirect materials	$ 41,250
Indirect labor	176,800
Power	17,250
Maintenance	34,500
Depreciation—Building	23,000
Depreciation—Machinery	95,850
Taxes and insurance	16,200
Supervisory salaries	252,500	657,350
Total costs		$ 1,210,450

2. Compute the direct materials variance, including its price and quantity variances.

Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.

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