[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 lts standard cost card per unit Is as follows: Direct material: 4 pounds at $8.00 per pound 32.00 Direct labor: 2 hours at $12.00 per hour Varlable overhead: 2 hours at $6.00 per hour 24.00 12.00 Total standard variable cost per unit 68.00 The company also established the following cost formulas for its selling expenses: Variable Cost Monthl per Unit Sold Fixed Cost per Advertising Sales salaries and commissions Shipping expenses $320,000 $120,000 $10.00 $3.00 The planning budget for March was based on producing and selling 32.000 units. However, during March the company actually produced and sold 37000 units and incurred the following costs: a. Purchased 160,000 pounds of raw materials at a cost of $7.40 per pound. All of this material was used in production. b. Direct-laborers worked 66,000 hours at a rate of $13.00 per hour c. Total variable manufacturing overhead for the month was $405,000. d. Total advertising, sales salaries and commissions, and shipping expenses were $321,000, $405,240, and $127,000, respectively

Explanation / Answer

Req 5: Actual Quantity Purchased (AQ) = 182,000 pounds Actual Price per pound(AP) = $ 7.40 per pound Std Price per pound (SP) = $ 8.00 per pound Material Price Variance = AQ (SP-AP) ( 182,000 ( $ 8- $7.40)) = $ 109,200 Fav Req 6: Std hours required per unit of output = 2 hours Actual Output = 37,000 units Std hours required for actual output = (37000*2) = 74,000 hours Std labour rate per hour = $ 12.00 per hour Therefore, Direct labour cost for flexible budget = Std hours for actual output * Std labour rate (74,000 hours* $2) = $148,000 Direct labour cost $148,000 Req 7: Std labour hours required actual output (SH)=74,000 hours Std Labour rate per hour(SR) = $ 12 per hour Actual Labour hours used(AH) = 66,000 hours Labour efficiency variance = SR (SH-AH) ( 12 (74000-66000)) = $96,000 Fav Req 8: Std Labour rate per hour(SR) = $ 12 per hour Actual Labour hours used(AH) = 66,000 hours Actual labour rate per hour(AR) = $ 13.00 per hour Labour rate variance = AH ( SR - AR) (66,000 (12-13)) = $ 66,000 unfav

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