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 material: 5 pounds at $8.00 per pound Direct labor: 2 hours at $14 per hour Variable overhead: 2 hours at $5 per hour Total standard variable cost per unit $40.ee 28.ee le.ee The company also established the following cost formulas for its selling expenses: Variable Cost per Unit Soll Fixed Cost per Month $ 200,000 $100,000 Advertising Sales salaries and commissions Shipping expenses $12.00 $ 3.00 The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs: a. Purchased 160.000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production b. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour. C. Total variable manufacturing overhead for the month was $280,500. d. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455.000, and $115,000 respectively.

Answer 1

Budgeted sales salaries and commission for actual units sold = Fixed cost + ( Variable cost per unit sold * Actual units sold ) = 100000 + ( 12.00 * 30000 )	460000
Actual sales salaries and commission	455000
Spending variance related to sales salaries and commissions = Budgeted - Actual = 460000 - 455000	5000	F