Preble Company manufactures one product. Its variable manufacturing overhead is

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 $9.00 per pound 45.00 Direct labor: 3 hours at $18.00 per hour Variable overhead: 3 hours at $9.00 per hour 27.00 54.00 Total standard variable cost per unit $126.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month $300,000 $220,000 Variable Cost per Unit Sold Advertising Sales salaries and commissions Shipping expenses $16.00 4.00 The planning budget for March was based on producing and selling 20,000 units. However, during March the company actualy produced and sold 24,800 units and incurred the following costs: ed 155,000 pounds of raw materials at a cost of $720 per pound. All of this material was used in production. b. Direct-laborers worked 68,000 hours at a rate of $19.00 per hour c. Total variable manufacturing overhead for the month was $615,000. d. Total advertising, sales salaries and commissions, and shipping expenses were $308 and $106,000, respectively. ,000, $614.720,

Explanation / Answer

Materials price variance would be calculated as follows:

Materials price variance

= (Actual price - Standard price) x Actual quantity purchased

= ($7.20 - $9) x 155,000

= $279,000 Favorable

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