Preble Company manufactures one product. Its variable manufacturing overhead is
ID: 2479868 • Letter: P
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: 6 pounds at $9 per pound
$
54
Direct labor: 3 hours at $15 per hour
45
Variable overhead: 3 hours at $5 per hour
15
Total standard cost per unit
$
114
The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 25,000 units and incurred the following costs:
a.
Purchased 180,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
b.
Direct laborers worked 61,000 hours at a rate of $16 per hour.
c.
Total variable manufacturing overhead for the month was $306,220.
1.
What raw materials cost would be included in the company’s planning budget for March?
Raw material cost
2.
What raw materials cost would be included in the company’s flexible budget for March?
Raw material cost
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.).)
Materials price 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.).)
Materials quantity variance
5.
If Preble had purchased 176,000 pounds of materials at $7.50 per pound and used 180,000 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.)
Materials price variance
6.
If Preble had purchased 176,000 pounds of materials at $7.50 per pound and used 180,000 pounds in production, what would be 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.). Do not round intermediate calculations.)
Materials quantity variance
7.
What direct labor cost would be included in the company’s planning budget for March?
Direct labor cost
8.
What direct labor cost would be included in the company’s flexible budget for March?
Direct labor cost
8.
What direct labor cost would be included in the company’s flexible budget for March?
Direct labor cost
9.
What is the labor rate 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.)
Labor rate variance
10.
What is the labor efficiency 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.)
Labor efficiency variance
11.
What is the labor spending 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.
Labor spending variance
12.
What variable manufacturing overhead cost would be included in the company’s planning budget for March?
Variable manufacturing overhead cost
13.
What variable manufacturing overhead cost would be included in the company’s flexible budget for March?
Variable manufacturing overhead cost
14.
What is the variable overhead rate variance for March? (Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
Variable overhead rate variance
15.
What is the variable overhead efficiency variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
Variable overhead efficiency variance
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:
Explanation / Answer
Answer 1
Raw material cost would be included in the company’s planning budget for March => 20000 * 6 * 9 => $1080000
Answer 2
Raw materials cost would be included in the company's flexible budget for March => 25000 * 6 * 9 => $1350000
Answer 3
materials price variance for March => (SP - AP) *AQ
=> ( 9 -7.5 ) * 180000
=> $270000 Favourable
Answer 4
materials quantity variance for March => (SQ -AQ ) * SP
=> ((25000 * 6) - 180000) * 9
=> $270000 unfavourable
Answer 5
materials price variance for March => (SP - AP) *AQ
=> ( 9 - 7.5) * 176000
=> $264000 F
Answer 6
materials quantity variance for March => (SQ -AQ ) * SP
=> ((25000 * 6) - 176000) * 9
=> $ 234000 UF
Answer 7
direct labor cost would be included in the company’s planning budget for March => 20000 *3 *15 => $900000
Answer 8
direct labor cost would be included in the company’s flexible budget for March => 25000 * 3 * 15 => $1125000
Answer 9
labor rate variance for March => (SR - AR) *AH
=> (15 -16 )61000
=> $61000 UF
Answer 10
the labor efficiency variance for March => (SH -AH ) * SR
=> ( ( 25000 * 3) - 61000) * 15
=> $210000 F
Answer 11
labor spending variance for March => 210000 - 61000 => 149000F
Answer 12
variable manufacturing overhead cost would be included in the company’s planning budget for March => 20000*3*5 => $300000
Answer 13
variable manufacturing overhead cost would be included in the company’s flexible budget for March => 25000*3*5 => $375000
Answer 14
variable overhead rate variance for March => (SR - AR) *AH
=> (5-5.02) *61000
=> 1220 UF
Answer 15
variable overhead efficiency variance for March => (SH - AH ) * SR
=> ( ( 25000 * 3) - 61000) * 5
=> $ 70000 F
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