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 $10.00 per pound Direct labor: 3 hours at $17.00 per hour Variable overhead: 3 hours at $6.00 per hour $ 50.00 51.00 18.00 Total standard variable cost per unit $ 119,00 The company also established the following cost formulas for its selling expenses: Advertising Sales salaries and commissions Shipping expenses Fixed Cost per Variable Cost Month per Unit Sold $330,000 $ 130,000 $15.00 $ 4.00 The planning budget for March was based on producing and selling 24,000 units. However, during March the company actually produced and sold 30,600 units and incurred the following costs: a. Purchased 170,000 pounds of raw materials at a cost of $9.00 per pound. All of this material was used in production b. Direct-laborers worked 82.000 hours at a rate of $18.00 per hour. C. Total variable manufacturing overhead for the month was $505,000. d. Total advertising, sales salaries and commissions, and shipping expenses were $337,000 $505,120, and $128.000, respectively.

Answer 1

2) Material quantity variance = (30600*5-170000)*10 = 170000 U

3) Material price variance = (10-9)170000 = 170000 F

8) Labor rate variance = (17-18)*82000 = 82000 U