The following information applies to th questions displayed below.) Preble Compa
ID: 2567884 • Letter: T
Question
The following information applies to th 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 materials: 5 pounds at $8 per pound Direct labor: 4 hours at $15 per hour Variable overhead: 4 hours at $5 per hour $ 40 60 20 Total standard cost per unit $ 120 The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 24,000 units and incurred the following costs a. Purchased 150,000 pounds of raw materials at a cost of $6.40 per pound. All of this material was used in production b. Direct laborers worked 66,000 hours at a rate of $18 per hour. c. Total variable manufacturing overhead for the month was $413,820.Explanation / Answer
5. Materials price variance = AQ (AP – SP)
= 181,000 pounds ($6.40 per pound – $8 per pound)
= $289,600 F
6. Materials quantity variance = SP (SQ – AQ)
Materials quantity variance = $8 per pound (5 x 24,000 – 150,000)
Materials quantity variance = $240,000 F
9. Labor rate variance = AH (SR – AR)
Labor rate variance = 66,000 (15 – 18)
Labor rate variance = $198,000 U
10. Labor efficiency variance = SR (SH – AH)
Labor efficiency variance = 15 (4 x 24,000 – 66,000)
Labor efficiency variance = $450,000 F
11. Labor spending variance = (AH*AR) – (SH*SR)
Labor spending variance = (66,000*18) – (4*24,000*15)
Labor spending variance = $252,000 U
14. Variable overhead rate variance = (SR – AR) x AH
Variable overhead rate variance = (15 – 18) x 66,000
Variable overhead rate variance = $198,000 U
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