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 58.00 per pound $40.00 Direct labor: 2 hours at $14 per hour 28.00 Variable overhead: 2 hours at 5 per hour 10.00 Total standard variable cost per unit $78.00 The company also established the following cost formulas for its selling expenses: Advertising Sales salaries and commissions Shipping expenses Fixed Cost Variable Cost per Month per Unit Sold $200,000 $100,000 $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 Page 425 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

2) Material quantity variance = (Standard qty-actual qty)Standard price = (30000*5-160000)*8 = 80000 U

3) Material price variance = (Standard price-actual price)actual qty = (8-7.50)*160000 = 80000 F

4) Material quantity variance = (Standard qty-actual qty)Standard price = (30000*5-160000)*8 = 80000 U

5) Material price variance = (Standard price-actual price)actual qty = (8-7.50)*170000 = 85000 F