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:

The company also established the following cost formulas for its selling expenses:

The planning budget for March was based on producing and selling 19,000 units. However, during March the company actually produced and sold 24,000 units and incurred the following costs:

Purchased 160,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production.

Total advertising, sales salaries and commissions, and shipping expenses were $380,000, $337,020, and $132,000, respectively.

  Direct material: 6 pounds at $8.00 per pound $ 48.00   Direct labor: 4 hours at $16.00 per hour 64.00   Variable overhead: 4 hours at $4.00 per hour 16.00   Total standard variable cost per unit $ 128.00 3. What is the materials price variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).) Materials price variance

Explanation / Answer

Part 3

Materials price variance = AQ*(AP-SP) = 160,000*(7.20-8) = -128,000

Part 4

Materials quantity variance = SP * (AQ-SQ) = 8*(160000-(24000*6)) = 8*(160000-144000) = 128000

Part 5

Materials price variance = AQ * (AP-SP) = 187000*(7.20-8) = -149600

Part 6

Direct labor cost = SQ*SP = (24000*4)*16 = 1,536,000

Part 7

Labor efficiency variance = SR * (AH - SH) = 16*(82000-(24000*4)) =16*(82000-96000) = -96000

Part 8

Labor rate variance = AH * (AR - SR) = 82000*(17-16) = 82000

Materials price variance $128,000 F

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