Required information The Foundational 15 [LO10-1, LO10-2, LO 10-3] [The followin

Question

Required information The Foundational 15 [LO10-1, LO10-2, LO 10-3] [The following information applies to the questions displayed below.] 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 $10 per pound Direct labor: 4 hours at $16 per hour Variable overhead: 4 hours at $7 per hour Total standard cost per unit $ 50 64 28 $ 142 The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 24,600 units and incurred the following costs: a. Purchased 164,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. b. Direct laborers worked 57,000 hours at a rate of $17 per hour. c. Total variable manufacturing overhead for the month was $653,220.

Explanation / Answer

1)Raw material cost in planning budget =Units planned *Unit material cost

                = 20000*50

                 = $ 1,000,000

2)Raw material cost in flexible budget =Actual units * unit material cost

           = 24600*50

          = $ 1230000

3)Material price variance =AQ [AR-SR]

     =164000 [7.5-10]

        = 410000 F

4)Material quantity variAnce = SR[AQ-SQ]

                      = 10[164000- (24600*5)]

                      = 10 [164000 - 123000]

                        = 410000 U

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