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:

The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 25,500 units and incurred the following costs:

a. Purchased 170,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production.

b. Direct laborers worked 73,000 hours at a rate of $14 per hour.

c. Total variable manufacturing overhead for the month was $427,050.

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.).)

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.).)

Direct materials: 6 pounds at $8 per pound $ 48 Direct labor: 4 hours at $13 per hour 52 Variable overhead: 4 hours at $5 per hour 20 Total standard cost per unit $ 120

Explanation / Answer

14). Variable Overhead Rate Variance :-

= Actual Cost - (Actual Hours * Standerd Rate)

= $427050 - (73000 * $5)

= $427050 - $365000

= $62050 U

15). Variable Overhead efficiency Variance :-

= Standerd Rate * (Actual Hours - Standerd Hours)

= $5 * (73000H - (4H * 25500Units))

= $5 * (73000H - 102000H)

= $5 * (-29000)

= $145000 F

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