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 $14.00 per hour ........................................... 28.00

Variable Overhead: 2 hours at $5.00 per hour .................................. 10.00

Total standard variable cost per unit .................................................... $78.00

* The company also established the following cost formulas for its selling expenses:

Fixed Cost Variable Cost

Per Month Per Unit Sold

Advertising .................................................................. $200,000

Sales salaries and commisions ............................... $100,000 $12.00

Shipping expenses .................................................... $3.00

The planning budget for March was based on producing and selling 25,000 units. However, March the compnay actually produced and sold 30,000 units and incurred the following costs:

a. Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was   

used in production

b. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour.

c. Total variable manufacturing overhead for the month was $280,500.

d. Total advertising, sales salaries and commissions, and shipping expenses were $210,000,

$455,000, and $115,000, respectively.

Required to Answer:

7. What is the direct labor efficency variance for March?

8. What is the direct labor rate variance for March?

9. What variable manufacturing overhead cost would be included in the company's flexible budget

for March?

10. What is the variable overhead efficiency variance for March?

11. What is the variable overhead rate variance for March?

12. What amounts of advertising, sales salaries and commisions, and shipping expenses would be

included in the company's flexible budget for March?

13. What is the spending variance related to advertising?

14. What is the spending variance related to sales salaries and commissions?

15. What is the spending variance related to shipping expenses?

Explanation / Answer

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