Required information The Foundational 15 [LO10-1, LO10-2, LO10-3] The following

Question

Required information The Foundational 15 [LO10-1, LO10-2, LO10-3] The following information applies to the questions displayed below. 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 pound50 Direct labor: 4 hours at $16 per hour Variable overhead: 4 hours at $7 per hour Total standard cost per unit 64 $142 The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 24,600 units and incurred the following costs: a. Purchased 164,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. b. Direct laborers worked 57,000 hours at a rate of $17 per hour. c. Total variable manufacturing overhead for the month was $653,220.

Explanation / Answer

7) Labour cost for planning budget = 20000*64 = 1280000

8) Labour cost for flexible budget = 24600*64 = 1574400

9) Labour rate variance = (16-17)*57000 = 57000 U

10) Labour efficiency variance = (24600*4-57000)*16 = 662400 F

11) Labour spending variance = 1574400-(57000*17) = 605400 F

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