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 32,000 units. However, during March the company actually produced and sold 37,000 units and incurred the following costs:

Purchased 160,000 pounds of raw materials at a cost of $7.40 per pound. All of this material was used in production.

Total advertising, sales salaries and commissions, and shipping expenses were $321,000, $405,240, and $127,000, respectively.

What raw materials cost would be included in the company’s flexible budget for March?

What is the materials quantity 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 materials price 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.).)

If Preble had purchased 182,000 pounds of materials at $7 per pound and used 160,000 pounds in production, what would be the materials quantity 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.).)

If Preble had purchased 182,000 pounds of materials at $7.40 per pound and used 160,000 pounds in production, what would be the materials price 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 direct labor 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 direct labor rate 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 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 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? (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 spending variance related to sales salaries and commissions? (Input the amounts as positive values. 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 spending variance related to shipping expenses? (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.).)

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

Solution 1:

Standard cost of direct material per unit = 4*$8 = $32 per unit

Actual units produced and sold in march = 37000 units

Raw materials cost would be included in the company’s flexible budget for March = Standard cost per unit * actual production = $32 * 37000 = $1,184,000

Solution 2:

Standard quantity of material for actual production = 37000 * 4 = 148000 pound

Actual quantity of material used = 160000 pound

Standard price of material = $8 per pound

Direct material quantity variance = (SQ - AQ) * SP = (148000 - 160000) * $8 = $96,000 U

Solution 3:

Actual price of direct material = $7.40 per pound

Direct material price variance = (SP - AP) * AQ = ($8 - $7.40) * 160000 = $96,000 F

Solution 4:

If Preble had purchased 182,000 pounds of materials at $7 per pound and used 160,000 pounds in production then material quantity variance for march will remain the same at $96,000 U. As in quantity variance, actual quantity material consumed is considered rather than purchased quantity.

Solution 5:

If Preble had purchased 182,000 pounds of materials at $7.40 per pound and used 160,000 pounds in production then direct material price variance = (SP - AP) * AQ purchsed

= ($8 - $7.40) * 182000 = $109,200 F

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