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 materials: 5 pounds at $8 per pound $ 40

Direct labor: 3 hours at $15 per hour 45

Variable overhead: 3 hours at $9 per hour 27

Total standard cost per unit $ 112

  

The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,000 units and incurred the following costs:

Purchased 160,000 pounds of raw materials at a cost of $6.50 per pound. All of this material was used in production.

Direct laborers worked 70,000 hours at a rate of $16 per hour.

Total variable manufacturing overhead for the month was $655,200.

1) What raw materials cost would be included in the company’s planning budget for March?

2)What raw materials cost would be included in the company’s flexible budget for March?

3) What is the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

4)What is the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

5) If Preble had purchased 185,000 pounds of materials at $6.50 per pound and used 160,000 pounds in production, what would be the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Do not round intermediate calculations.)

The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,000 units and incurred the following costs:

Explanation / Answer

The preble company sheet=

Standard cost per Unit=$112

Planned budget for March (Produced and Sold) = 21000 Units

Actual Budget for March (Produced and Sold)= 26000 Units

Assuming the standard cost per unit is $112; The planned budget is 21000*112=2352000

Assuming Actual budget Cost per unit is $112; the actual budget is 26000*112=2912000

Standard cost per unit=2,825,200

1. Planned cost of Raw material=1040000 pounds of raw material is used to manufacture 26000 units

for manufacturing 21000 units is=840000

2. Raw Material cost included for companys flexible budget=30769

26000-21000=5000

3. Material Quantity variance for March=30769.23 (N)

(Actual Quantity Used-Standard Quantity*standard Cost per unit)

4. Material Price Variance=There will be no difference in the price variance as the acual quantity and the actual price are the same

Details Qty Rate Total Direct materials 5 8 40 Direct Labor 3 15 45 Variable Overhead 3 9 27

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