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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 20,000 units. However, during March the company actually produced and sold 24,600 units and incurred the following costs:

Purchased 164,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.

Direct laborers worked 57,000 hours at a rate of $17 per hour.

Total variable manufacturing overhead for the month was $653,220.

Required:

1. What raw materials cost would be included in the company’s planning budget for March?

2. What is the materials price 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.). Input all amounts as positive values.)

3. If Preble had purchased 172,000 pounds of materials at $7.50 per pound and used 164,000 pounds in production, what would be the materials price 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.). Input all amounts as positive values. Do not round intermediate calculations.)

4. What direct labor cost would be included in the company’s planning budget for March?

Direct materials: 5 pounds at $10 per pound $ 50 Direct labor: 4 hours at $16 per hour 64 Variable overhead: 4 hours at $7 per hour 28 Total standard cost per unit $ 142

Explanation / Answer

1 Raw material cost in planning budget = 20000*50 = 1000000

2) Material price variance = (10-7.50)*164000 = 410000 F

3) Material price variance = (10-7.50)*172000 = 430000 F

4) Direct labour cost in planning budget = 20000*64 = 1280000

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