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

The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,600 units and incurred the following costs:

Purchased 154,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used in production.

Total advertising, sales salaries and commissions, and shipping expenses were $286,000, $511,000, and $123,000, respectively.

What amounts of advertising, sales salaries and commissions, and shipping expenses would be included in the company’s flexible budget for March?

What is the spending variance related to advertising?

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

What is the spending variance related to shipping expenses?

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:

Explanation / Answer

Preble Company

Preble Company

Flexible Budget For the Month Ended March 31 Units sold (q) 26,600 Expenses: Advertising 2,80,000 Fixed Expense Sales salaries and commissions 5,45,800 Fixed Expense+13*26600(Variable Portion) Shipping expenses 1,06,400 4*26600(Variable) Total 9,32,200 Flexible Actual Spending Variance: Budgeted Cost Variance Type Advertising 2,80,000 286000 -6,000 Unfavourable Sales salaries and commissions 5,45,800 511000 34,800 Favourable Shipping expenses 1,06,400 123000 -16,600 Unfavourable

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