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

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 $10 per pound Direct labor: 2 hours at $15 per hour Variable overhead: 2 hours at $5 per hour $ 50 30 10) Total standard cost per unit $ 90 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 75,000 hours at a rate of $16 per hour. c. Total variable manufacturing overhead for the month was $558,750.

Explanation / Answer

2

Calculation of Raw material cost in Flexible Budget:

Actual Units Produced

37600

Standard Direct material cost Per unit

$      50.00

Raw material cost in Flexible Budget = 37600 * 50 =

$1,880,000

3

Calculation of Material Price Variance for March:

Formula:

Material Price Variance = (Actual Price - Standard Price) * Actual Quantity

Actual Price per pound

9.4

Standard Price per pound

10

Actual Quantity (Pounds)

200000

Material Price Variance = (9.4-10) * 200000 =

$   120,000

F

4

Calculation of Material Quantity Variance for March:

Formula:

Material Quantity Variance = (Actual Quantity - Standard Quantity) * Standard Price

Actual Quantity (Pounds)

200000

Standard Quantity (Pounds) = 37600 Units * 5 Pounds =

188000

Standard Price per pound

10

Material Quantity Variance = (200000 - 188000) *$10

$   120,000

U

5

Calculation of Material Price Variance for March:

Formula:

Material Price Variance = (Actual Price - Standard Price) * Actual Quantity

Actual Price per pound

9.4

Standard Price per pound

10

Actual Quantity (Pounds)

190000

Material Price Variance = (9.4-10) * 190000 =

$   114,000

F

2

Calculation of Raw material cost in Flexible Budget:

Actual Units Produced

37600

Standard Direct material cost Per unit

$      50.00

Raw material cost in Flexible Budget = 37600 * 50 =

$1,880,000

3

Calculation of Material Price Variance for March:

Formula:

Material Price Variance = (Actual Price - Standard Price) * Actual Quantity

Actual Price per pound

9.4

Standard Price per pound

10

Actual Quantity (Pounds)

200000

Material Price Variance = (9.4-10) * 200000 =

$   120,000

F

4

Calculation of Material Quantity Variance for March:

Formula:

Material Quantity Variance = (Actual Quantity - Standard Quantity) * Standard Price

Actual Quantity (Pounds)

200000

Standard Quantity (Pounds) = 37600 Units * 5 Pounds =

188000

Standard Price per pound

10

Material Quantity Variance = (200000 - 188000) *$10

$   120,000

U

5

Calculation of Material Price Variance for March:

Formula:

Material Price Variance = (Actual Price - Standard Price) * Actual Quantity

Actual Price per pound

9.4

Standard Price per pound

10

Actual Quantity (Pounds)

190000

Material Price Variance = (9.4-10) * 190000 =

$   114,000

F

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.