Required information The Foundational 15 [LO10-1, LO10-2, LO10-3] [The following

Question

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

(a) Labour rate variance (Standard rate - actual rate) actual hours

= (16-17)x 57000   

= 57000 (U)

(b) Labour efficiency variance = (Standard hours - actual hours) standard rate

= ((24600*4) - 57000) x 16

= 662400 (F)

(c) Labour spending variance = (Standard rate - actual rate) actual hours

= (16-17)x 57000   

= 57000 (U)

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