Question

Required information (The following information applies to the questions displayed below.) Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows: Direct materials: 6 kg at $9.00 per kg Direct labour: 3 hours at $15 per hour Variable overhead: 3 hours at 55 per hour $ 54.00 45.00 15.00 Total standard cost per unit $ 114.00 The company planned to produce and sell 20.000 units in March. However, during March the company actually produced and sold 25,000 units and incurred the following costs: a. Purchased 180.000 kg of raw materials at a cost of $7.50 per kg. All of this material was used in production b. Direct labour: 61,000 hours at a rate of $16 per hour. c. Total variable manufacturing overhead for the month was $306.220.

Answer 1

Actual Production	Std Qty Direct Material /unit	Std Qty Actual Prodn	Actual Material Used	Std Rate /unit	Actual Rate /Unit
25000	6	150,000	180,000	$             9.00	$     7.50
Actual Production	Std Labor Hr /unit	Std Labor Hr Actual Prodn	Actual Labor Hrs	Std Labor Rate /Hr	Actual Labor Rate /Hr
25000	3	75000	61000	$          15.00	$   16.00
Actual Production	Std Var OH Hr /unit	Std Var OH Hr Actual Prodn	Actual Var OH Hrs	Std Var OH Rate /Hr	Actual Var OH Rate /Hr
25000	3	75000	61000	$             5.00	$     5.02

1	Direct Materials Price Variance= Actual Qty Used( Actual Rate-Std Rate)
	=180000*(7.5-9)=	27,000	(F)
2	Direct Material Efficiency/Quantity Variance =Std Rate ( Actual Qty used-Std qty for actual output)
	=9*(180,000-150,000)	27,000	(U)
5	Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate)
	=61000*(16-15)	61,000	(U)
6	Direct Labor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output)
	=15*(61000-75000)	210,000	(F)
7	Total Variable Overhead spending Variance= =Actual Var OH -Std Var OH for Actual Production=
	=306220-75000*5	68780	(U)
8	Variable Overhead Rate Variance= Actual Qty Used( Actual Rate-Std Rate)
	=61000*(5-5.02)	1220	(U)