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.

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:

3. What is the spending variance related to advertising? (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.).) Spending variance

Explanation / Answer

13.

Actual advertising cost - Budgeted advertising cost = $380000 - $370000 = $10000 U

14.

Actual sales salaries and commissions - Budgeted = $337020 - [$100000 + (24000 x $14.00)] = $337020 - $436000 = $98980

15.

Actual shipping cost - Budgeted shipping cost = $132000 - (24000 x $5.00) = $132000 - $120000 = $12000 U

Spending variance $       10,000 U

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