Antuan Company set the following standard costs per unit for its product. Direct materials (6 pounds @ $5 per pound) $ 30 Direct labor (2 hours @ $17 per hour) 34 Overhead (2 hours @ $18.50 per hour) 37 Standard cost per unit $ 101 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. $ 45,000 Indirect labor 180,000 Power 45,000 Maintenance 90,000 360,000 Total variable overhead costs. Fixed overhead costs 24,000 Depreciation-Building Depreciation-Machinery 80,000 Taxes and insurance 12,000 Supervisory salaries. 79,000 Total fixed overhead costs 195,000 Total overhead costs $ 555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (91,000 pounds @ $5.10 per pound) $ 464,100 526, 125 Direct labor (30,500 hours @ $17.25 per hour) Overhead costs Indirect materials $ 44,250 Indirect labor 177,750 Power 43,000 Maintenance 96,000 24,000 Depreciation-Building Depreciation-Machinery 75,000 Taxes and insurance 11,500 Supervisory salaries. 89,000 560,500 Total costs $ 1,550,725
Antuan Company set the following standard costs per unit for its product. Direct materials (6 pounds @ $5 per pound) $ 30 Direct labor (2 hours @ $17 per hour) 34 Overhead (2 hours @ $18.50 per hour) 37 Standard cost per unit $ 101 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. $ 45,000 Indirect labor 180,000 Power 45,000 Maintenance 90,000 360,000 Total variable overhead costs. Fixed overhead costs 24,000 Depreciation-Building Depreciation-Machinery 80,000 Taxes and insurance 12,000 Supervisory salaries. 79,000 Total fixed overhead costs 195,000 Total overhead costs $ 555,000 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (91,000 pounds @ $5.10 per pound) $ 464,100 526, 125 Direct labor (30,500 hours @ $17.25 per hour) Overhead costs Indirect materials $ 44,250 Indirect labor 177,750 Power 43,000 Maintenance 96,000 24,000 Depreciation-Building Depreciation-Machinery 75,000 Taxes and insurance 11,500 Supervisory salaries. 89,000 560,500 Total costs $ 1,550,725
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 72P: Moleno Company produces a single product and uses a standard cost system. The normal production...
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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