The following information applies to the questions displayed below Preble Compan

Question

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 labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $700 per pound$35.00 Direct labor: 3 hours at $12.00 per hour Variable overhead: 3 hours at $3.00 per hour 36.00 900 Total standard variable cost per unit $80.00 The company also established the following cost formulas for its selling expenses Varlable Cost Monthper Unit Sold Fixed Cost per Advertising Sales salaries and commissions Shipping expenses $360,000 $100,000 $1000 3.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: a. Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. b. Direct-laborers worked 88,000 hours at a rate of $13.00 per hour c Total variable manufacturing overhead for the month was $270,000 d. Total advertising. sales salaries and commisstons, and shipping expenses were $370.000, $270,160, and $131,000,respectively

Explanation / Answer

1) Raw material cost in flexible budget = 34000*35 = 1190000

2) Material quantity variance = (34000*5-175000)*7 = 35000 U

3) Material price variance = (7-6.80)*175000 = 35000 F

4) Material quantity variance = (34000*5-175000)*7 = 35000 U

5) Material price variance = (7-6.80)*186000 = 37200 F

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