Preble Company manufactures one product. Its variable manufacturing overhead is
ID: 2559975 • Letter: P
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:
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:
Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
Direct laborers worked 55,000 hours at a rate of $15.00 per hour.
Total variable manufacturing overhead for the month was $280,500.
5. If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 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.)
6. If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 pounds in production, what would be the materials quantity 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.)
7. What direct labor cost would be included in the company’s planning budget for March?
8. What direct labor cost would be included in the company’s flexible budget for March?
Direct materials: 5 pounds at $8.00 per pound $ 40.00 Direct labor: 2 hours at $14 per hour 28.00 Variable overhead: 2 hours at $5 per hour 10.00 Total standard cost per unit $ 78.00Explanation / Answer
6. If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 pounds in production, what would be the materials quantity 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.)
7. What direct labor cost would be included in the company’s planning budget for March?
Ans: 5 pounds @ $8 for 25000 pounds = $100000
8. What direct labor cost would be included in the company’s flexible budget for March?
Ans: 1.833 hours @ $15 per hour for 30000 pounds= $824850
Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U Material price variance = (AP-SP)*AQ AP = Actual price per Pound = $7.5 SP = Standard price per Pound = $8 AQ = Actual quantity consumed= 160000 F= Favourable U = Unfavourable Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U 7.5 8 0.5 160000 80000 F Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U Material quantity variance = (AQ-SQ)*SP AQ = Actual quantity consumed= 160000 SQ = Standard quantity = 5*30000 = 150000 SP = Standard price per unit = $8 F= Favourable U = Unfavourable Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U 160000 150000 -10000 8 -80000 U Total Material variance Total Actual Total Std Total variance F/U 1200000 1200000 0 None (160000*7.5) (150000*8) If Preble Purchased 170000 punds and used only 160000 pounds for Production Material quantity variance = (AQ-SQ)*SP AQ = Actual quantity consumed= 160000 SQ = Standard quantity = 5*30000 = 150000 SP = Standard price per unit = $8 F= Favourable U = Unfavourable Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U 160000 150000 -10000 8 -80000 U Total Material variance Total Actual Total Std Total variance F/U 1200000 1200000 5000 F (160000*7.5) (150000*8) Diff in SP-AP ($.5)*10000 5000Related Questions
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