[The following information applies to the questions displayed below. Preble Comp

Question

[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 material: 5 pounds at $8.00 per pound Direct labor: 2 hours at $14 per hour Variable overhead: 2 hours at $5 per hour $40.00 28.00 10.00 Total standard variable cost per unit $78.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month $200,000 $100,000 Variable Cost per Unit Sold Advertising Sales salaries and commissions Shipping expenses $12.00 3.00 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: a. Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. b. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour. c. Total variable manufacturing overhead for the month was $280,500. d. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.

Explanation / Answer

9) Variable manufacturing cost in flexible budget = 30000*10 = 300000

10) Variable overhead efficiency variance = (30000*2-55000)5 = 25000 F

11) Variable overhead rate variance = (5*55000-280500) = 5500 U

12) Flexible budget :

Unit sold 30000 Expense Advertising 200000 Sales salaries and commissions 460000 Shipping expense 90000 Total 750000

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