Company manufactures one product. its variable manufacturing overhead is applied

Question

Company manufactures one product. its variable manufacturing overhead is applied t production based on direct labor hours and its standard cost card per unit is as follows:

Direct Materials: 5 pounds at $8 per pound =$40

Direct Labor 2 hours at $14 per hour = $28

Variable overhead 2 hours at $5 per hour = $10

Total standard cost per unit = $78

The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs:

Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.

Direct-laborers worked 55,000 hours at a rate of $15.00 per hour.

Total variable manufacturing overhead for the month was $280,500.

1-4 already answered.

REQUIRED:

5. If Preble had purchased 170,000 pounds of material at7.50 per pound and used 160,000pounds in production what would be the materials price varience for march?

6. If Preble had purchased 170,000 pounds of material at7.50 per pound and used 160,000pounds in production what would be the materials quantity varience for march?

7. What direct labor cost would be included in the companys planning budget for march?

8. What direct labor cost would be included in the companys flexible budget for march?

9. What is the labor rate variance for march?

10. What is the labor efficiency variance for march?

11. What is the labor spending variance for march?

12. What variable manufacturing overhead cost would be included in the companys planning budget for march?

13. What variable manufacturing overhead cost would be included in the companys flexible budget for march?

14. What is the variable overhead rate variance for March?

15. What is the variable overhead efficiency variance for March?

Explanation / Answer

5. If Preble had purchased 170,000 pounds of material at7.50 per pound and used 160,000pounds in production what would be the materials price varience for march?

Materials price variance = (Actual price - Standard Price) *Actual Quantity

Materials price variance = (7.50 - 8)*170000

Materials price variance = $ 85000 favorable

6. If Preble had purchased 170,000 pounds of material at7.50 per pound and used 160,000pounds in production what would be the materials quantity varience for march?

Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price

Materials usage/quantity variance = (160000 - 5*30000)*8

Materials usage/quantity variance = $ 80000 Unfavorable

7. What direct labor cost would be included in the companys planning budget for march?

Direct labor cost would be included in the companys planning budget for march = Direct Labor Rate * Budgeted Direct Labor Hour

Direct labor cost would be included in the companys planning budget for march = 14* (25000*2)

Direct labor cost would be included in the companys planning budget for march = $ 700,000

8. What direct labor cost would be included in the companys flexible budget for march?

Direct labor cost would be included in the companys flexible budget for march = Direct Labor Rate * Standard Direct Labor Hour at actual output

Direct labor cost would be included in the companys flexible budget for march = 14* (30000*2)

Direct labor cost would be included in the companys flexible budget for march = $ 840,000

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