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 $8.00 per pound Direct labor: 2 hours at $14 per hour Variable overhead: 2 hours at $5 per hour Total standard cost per unit $ 40.00 28.00 10.00 $78.00 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.

Answer 1

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

6) Material quantity variance = (30000*5-160000)*8 = 80000 U

7) direct labor in planning budget = 25000*28 = 700000

8) Direct labor in Flexible budget = 30000*28 = 840000

9) Labor rate variance = (14-15)*55000 = 55000 U