[The following information applies to the questions displayed below.] Preble Com

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[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 its standard cost card per unit is as follows:

The planning budget for March was based on producing and selling 15,000 units. However, during March the company actually produced and sold 17,000 units and incurred the following costs:

Purchased 170,000 pounds of raw materials at a cost of $8.00 per pound. All of this material was used in production.

Direct laborers worked 64,000 hours at a rate of $14 per hour.

Total variable manufacturing overhead for the month was $513,920.

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

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

3. 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.)

4. What is 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.)

5. If Preble had purchased 179,000 pounds of materials at $8.00 per pound and used 170,000 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.)

6. If Preble had purchased 179,000 pounds of materials at $8.00 per pound and used 170,000 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. Do not round intermediate calculations.)

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?

9. What is the labor rate 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.)

10. What is the labor efficiency 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.)

11. What is the labor spending 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.)

12. What variable manufacturing overhead cost would be included in the company’s planning budget for March?

13. What variable manufacturing overhead cost would be included in the company’s flexible budget for March?

14. What is the variable overhead rate variance for March? (Round the actual overhead rate to two decimal places. 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.)

15. What is the variable overhead efficiency variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places. 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.)

Direct materials: 8 pounds at $10 per pound $ 80 Direct labor: 5 hours at $13 per hour 65 Variable overhead: 5 hours at $8 per hour 40 Total standard cost per unit $ 185

Explanation / Answer

1) Raw material cost per unit = $80

Units in Planning Budget = 15,000 units

Total raw material cost included in the company's planning budget = 15,000 units*$80 = $1,200,000

2) Raw material cost per unit = $80

Actual units produced in March = 17,000 units

Raw material cost included in the company's flexible budget = 17,000 units*$80 = $1,360,000

3) Materials Price Variance = (Standard price - Actual Price)*Actual Quantity purchased

= ($10-$8)170,000 pounds = $340,000 "F"

4) Material Quantity Variance = (Standard Quantity - Actual Quantity consumed)Standard Price

[(17,000 units*8 pounds) - 170,000]*$10 = $340,000 "A"

5) Materials Price Variance = (Standard price - Actual Price)*Actual Quantity purchased

= ($10-$8)179,000 pounds = $358,000 "F"

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