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 Direct labor:3 hours at $18.00 per hour Variable overhead:3 hours at $9.00 per hour $45.00 54.00 2700 $126.00 Total standard variable cost per unit 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 actually produced and sold 24,800 units and incurred the following costs: a. Purchased 155,000 pounds of raw materials at a cost of $7.20 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 $308,000, $614,720, and $106,000, respectively

Explanation / Answer

2) Material quantity variance = (24800*5-155000)*9 = 279000 U

7) Labour efficiency variance = (24800*3-68000)18 = 115200 F

8) Labour rate variance = (18-19)*68000 = 68000 U

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