Preble Company manufactures one product. Its variable manufacturing overhead is
ID: 2466006 • 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 materials: 5 pounds at $8 per pound $ 40
Direct labor: 3 hours at $15 per hour 45
Variable overhead: 3 hours at $9 per hour 27
Total standard cost per unit $ 112
The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,000 units and incurred the following costs:
Purchased 160,000 pounds of raw materials at a cost of $6.50 per pound. All of this material was used in production.
Direct laborers worked 70,000 hours at a rate of $16 per hour.
Total variable manufacturing overhead for the month was $655,200.
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.).)
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.).)
5) If Preble had purchased 185,000 pounds of materials at $6.50 per pound and used 160,000 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.). Do not round intermediate calculations.)
6)If Preble had purchased 185,000 pounds of materials at $6.50 per pound and used 160,000 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.). Do not round intermediate calculations.)
7) What direct labor cost would be included in the company’s planning 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.). 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.). 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.). 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.).)
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.).)
The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,000 units and incurred the following costs:
Explanation / Answer
1. Raw material cost to be included in company's planing budget for march
= $40 (Budgeted price) * 21000 (Budgeted production)
= $840,000
2. Raw materials cost to be included in the company’s flexible budget for March
= 160,000 (Actual Quantity) * $6.50 (Actual Price)
= $1,040,000
3. Materials price variance
= Actual Quantity (Standard Price - Actual Price)
= 160,000 (8 - 6.5)
= 240,000 (F)
4. Materials quantity variance
= Standard Price (Standard Quantity - Actual Quantity)
= 8 (26000*5 - 160000)
= 240,000 (U)
5. Materials price variance
= Actual Quantity (Standard Price - Actual Price)
= 185,000 (8 - 6.5)
= 277,500
6. Materials quantity variance
= Standard Price (Standard Quantity - Actual Quantity)
= 8 (26000*5 - 185000)
= $440,000
7. Direct labor cost would be included in the company’s planning budget for March.
= 45 (Budgeted Rate) * 21000 (Budgeted Production)
= $945,000
8. Direct labor cost would be included in the company’s flexible budget for March
= $16 (Actual Rate) * 70000 (Actual Hour)
= $1,120,000
9. Labor rate variance
= Standard Rate (Standard Hour - Actual Hours)
= 15 (26000*3 - 70000)
= 120,000 (F)
10. Labor efficiency variance
= Actual Hour (Standard Rate - Actual Rate)
= 70000 (15 - 16)
= 70,000 (U)
11. Labor spending variance
=
12. Variable manufacturing overhead cost would be included in the company’s planning budget for March
= $27 (Budgeted Rate) * 21000 (Budgeted Production)
= $567,000
13. Variable manufacturing overhead cost would be included in the company’s flexible budget for March
= $655,200
14. Variable overhead rate variance
= Standard Rate (Standard Hour - Actual Hours)
= $9 (3*26000 - 70000)
= 72,000 (F)
15. Variable overhead efficiency variance
= Actual Hour (Standard Rate - Actual Rate)
= 70,000 (9 - 9.36)
= 25,200
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