Preble Company manufactures one product. Its variable manufacturing overhead is

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 material: 5 pounds at $10.00 per pound $ 50.00 Direct labor: 3 hours at $17.00 per hour 51.00 Variable overhead: 3 hours at $6.00 per hour 18.00 Total standard variable cost per unit $ 119.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month Variable Cost per Unit Sold Advertising $ 330,000 Sales salaries and commissions $ 130,000 $ 15.00 Shipping expenses $ 4.00 The planning budget for March was based on producing and selling 24,000 units. However, during March the company actually produced and sold 30,600 units and incurred the following costs: a. Purchased 170,000 pounds of raw materials at a cost of $9.00 per pound. All of this material was used in production. b. Direct-laborers worked 82,000 hours at a rate of $18.00 per hour. c. Total variable manufacturing overhead for the month was $505,000. d. Total advertising, sales salaries and commissions, and shipping expenses were $337,000, $505,120, and $128,000, respectively. What raw materials cost would be included in the company’s flexible budget for March?

Explanation / Answer

Calculate  What raw materials cost would be included in the company’s flexible budget for March? :

Raw material cost in flexible budget = 30600*50 = 1530000

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