Reference no: EM131780117

Problem - Silver Company set the following standard costs for one unit of its product.

Direct materials (3.0 Ibs. @ $5.0 per Ib.)	$15.00
Direct labor (1.6 hrs. @ $13.0 per hr.)	20.80
Overhead (1.6 hrs. @ $18.50 per hr.)	29.60
Total standard cost	$65.40

The predetermined overhead rate ($18.50 per direct labor hour) is based on 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% level.

Overhead Budget (75% capacity)
Variable overhead costs
Indirect materials	$22,000
Indirect labor	90,000
Power	22,000
Repairs and maintenance	45,000
Total variable overhead costs		$179,000
Fixed overhead costs
Depreciation-building	24,000
Depreciation-machinery	74,000
Taxes and insurance	19,000
Supervision	148,000
Total fixed overhead costs		265,000
Total overhead costs		$444,000

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

Direct materials (45,500 Ibs. @ $5.10 per lb.)		$232,050
Direct labor (31,000 hrs. @ $13.40 per hr.)		415,400
Overhead costs
Indirect materials	$45,750
Indirect labor	177,250
Power	25,300
Repairs and maintenance	51,750
Depreciation-building	24,000
Depreciation-machinery	99,900
Taxes and insurance	17,100
Supervision	148,000	589,050
Total costs		$1,236,500

Required  -

Examine the monthly overhead budget to (a) determine the costs per unit for each variable overhead and its total per unit costs, and (b) identify the total fixed costs per month.

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

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

Compute the direct labor cost variance, including its rate and efficiency variances.

Compute the (a) variable overhead spending and efficiency variances, (b) fixed overhead spending and volume variances, and (c) total overhead controllable variance.

Prepare a detailed overhead variance report that shows the variances for individual items of overhead.