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 $8.00 per kg Direct labour: 3 hours at $14 per hour Variable overhead: 3 hours at $5 per hour Total standard cost per unit $ 48.ee 42.00 15.00 $ 105.00 The company planned to produce and sell 19,000 units in March. However, during March the company actually produced and sold 24,000 units and incurred the following costs: a. Purchased 160,000 kg of raw materials at a cost of $7.20 per kg. All of this material was used in production b. Direct labour: 60.000 hours at a rate of $15 per hour. c. Total variable manufacturing overhead for the month was $336,600.

Answer 1

$ Actual Price Actual Quantity Standard Quantity Standard Price 7.20 per kg 160000 144000 8.00 per kg (6kg x 24000) $ Material Price Variance = Actual Cost - (Standard Price x Actual Quantity used) $ 11,52,000 -( $ 8.00 -128000 F х 160000) Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price 160000 144000) 128000 U х $ 8 $ Actual Rate Actual hours Standard hours Standard Rate 14.00 60000 72000 15.00 (3 hrs x 24000) $ Labor Rate Variance Actual Cost - (Standard Rate x Actual hours worled) $ 8,40,000 -( $ 15.00 -60000 F х 60000) Labor Efficiency Variance = (Actual hours - Standard hours) x Standard Rate 60000 72000) - 180000 F X 15 (3 hrs x 24000) Standard hours Actual hours Standard Variable OH Rate Actual Variable Overhead 72000 60000 5.00 3,36,600 $ $

Variable Overhead Spending Variance = Actual Variable Overhead - (AH SVR) $ 3,36,600 60,000 36600 U -( X $ 5.00 ) = = Variable Overhead Rate Variance = (Actual hours - Standard hours) x Standard Rate 60000 72000) x -60,000 F $ 5.00 = Solutions : Material Price Variance Material Quantity Variance Labor Rate Variance Labor Efficiency Variance Variable Overhead Spending Variance Variable Overhead Rate Variance 1,28,000.00 F 1,28,000.00 U 60,000.00 F 1,80,000.00 F 36,600.00 U 60,000.00 F

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