Question

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:

Direct materials: 5 pounds at $10 per pound	$	50
Direct labor: 4 hours at $14 per hour		56
Variable overhead: 4 hours at $4 per hour		16
Total standard cost per unit	$	122

The planning budget for March was based on producing and selling 29,000 units. However, during March the company actually produced and sold 34,200 units and incurred the following costs:

1. Purchased 180,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used in production.

2. Direct laborers worked 74,000 hours at a rate of $15 per hour.

3. Total variable manufacturing overhead for the month was $440,300.

rev: 11_20_2017_QC_CS-109672

5. If Preble had purchased 189,000 pounds of materials at $9.50 per pound and used 180,000 pounds in production, what would be the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

Answer 1

5) Material price variance Actual quantity x (Actual price- Standard price) 189,000 x (9.50- 10) $ 94,500 Favorable Material Price Variance $ 94,500 F Note: Actual price per unit was less than the standard price per unit therefore it is favorable variance.