Preble Company manufactures one product. Its variable manufacturing overhead is
ID: 2487668 • 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:
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.
PLEASE ANSWER ALL
1. What raw materials cost would be included in the company’s planning budget for March?
7. What direct labor cost would be included in the company’s planning budget for March?
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.).)
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.).)
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.).)
12. What variable manufacturing overhead cost would be included in the company’s planning budget for March?
13. What variable manufacturing overhead cost would be included in the company’s flexible budget for March?
14. What is the variable overhead 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.).)
15. What is the variable overhead 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.)
PLEASE ANSWER ALL
THANK YOU
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
1) Raw material cost in planning budget Number of units planned for March 25000 Raw material required per unit 5 Total raw material required 125000 Cos per pound of RM 8 Raw material cost in planning budget 1000000 7) labor cost in planning budget Number of units planned for March 25000 labor required per unit 2 Total labor required 50000 Rate per hour 14 labor cost in planning budget 700000 9) Labor rate variance = ( Actual rate -standard rate ) * actual hours = ( 15 - 14) * 55000 = 1* 55000 = 55000 U 10) Labor efficiency variance = ( standard hours - actual hours) * standard rate = ( 2 * 30000 - 55000) * 14 = ( 60000 - 55000) * 14 = 5000 * 14 = 70000 F 11) Labor spending variance = Labor rate variance = 55000 U 12) variable overhead cost in planning budget Number of units planned for March 25000 variable overhead required per unit 2 Total variable overhead required 50000 Rate per hour 5 variable overhead cost in planning budget 250000 13) variable overhead cost in flexible budget Number of units planned for March 30000 variable overhead required per unit 2 Total variable overhead required 60000 Rate per hour 5 variable overhead cost in planning budget 300000 14) variable overhead rate variance = Actual variable overhead - Actual hours * standard variable overhead rate = 280500 - 55000*5 = 280500 - 275000 = 5500 U 15) variable overhead efficiency variance = ( actual hours - standard hours) * standard rate = (55000 - 2*30000) * 7 = ( 55000 - 60000)*7 = 5000 * 7 = 35000 F
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