Preble Company manufactures one product. Its variable manufacturing overhead is
ID: 2407461 • Letter: P
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 material: 5 pounds at $10.00 per pound $ 50.00
Direct labor: 2 hours at $13.00 per hour 26.00
Variable overhead: 2 hours at $8.00 per hour 16.00
Total standard variable cost per unit $ 92.00
The company also established the following cost formulas for its selling expenses:
Fixed Cost per Month Variable Cost per Unit Sold
Advertising $ 400,000
Sales salaries and commissions $ 130,000 $ 11.00
Shipping expenses $ 3.00
The planning budget for March was based on producing and selling 32,000 units. However, during March the company actually produced and sold 37,600 units and incurred the following costs:
a. Purchased 200,000 pounds of raw materials at a cost of $9.40 per pound. All of this material was used in production.
b. Direct-laborers worked 65,000 hours at a rate of $14.00 per hour.
c. Total variable manufacturing overhead for the month was $525,000.
d. Total advertising, sales salaries and commissions, and shipping expenses were $416,000, $525,200, and $135,000, respectively.
What variable manufacturing overhead cost would be included in the company’s flexible budget for March?
What is the variable overhead efficiency variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
What is the variable overhead rate variance for March? (Do not round intermediate calculations. Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
What variable manufacturing overhead cost would be included in the company’s flexible budget for March?
Explanation / Answer
9) Variable manufacturing included in company's flexible budget actual output * standard cost per unit 37600*16 601600 10) Variable overhead efficiency variance (actual hours - standard hours allowed)*standard rate (65000 - 37600*2) * 8 81600 F 11) Variable overhead rate variance (actual rate - standard rate)*actual hours (525000 - 8*65000) 5000 U 12) Advertising,Sales salaries and commissionand shipping expense flexible budget variable Fixed total Advertising 0 400,000 400000 Sales,salaries &comm(37600*11) 413600 130,000 543600 Shipping expense (37600*3) 112800 0 112800
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