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 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 $ 78.00    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. 11. What is the labor spending variance for March

Explanation / Answer

Labour spending variance is the labour rate variance which is the actual labour rate per hour minus standard labour rate per hour which is then multiplied by actual labour hours.

Labour Spending variance Actual rate Standard rate AR-SR Actual hours Variance (AR-SR)*Actual hours 15.00 14 $1.00 55,000 55,000.00 Unfavourable

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