[The following information applies to the questions displayed below.] Preble Com
ID: 2525928 • Letter: #
Question
[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 pound
$
50
Direct labor: 4 hours at $16 per hour
64
Variable overhead: 4 hours at $7 per hour
28
Total standard cost per unit
$
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:
Purchased 164,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
Direct laborers worked 57,000 hours at a rate of $17 per hour.
Total variable manufacturing overhead for the month was $653,220.
Required:
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.). Input all amounts as positive values.)
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.). Input all amounts as positive values.)
5. If Preble had purchased 172,000 pounds of materials at $7.50 per pound and used 164,000 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.). Input all amounts as positive values. Do not round intermediate calculations.)
6. If Preble had purchased 172,000 pounds of materials at $7.50 per pound and used 164,000 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.). Input all amounts as positive values. Do not round intermediate calculations.)
7. What direct labor cost would be included in the company’s planning budget for March?
8. What direct labor cost would be included in the company’s flexible 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.). Input all amounts as positive values. 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.). Input all amounts as positive values. 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.). Input all amounts as positive values. 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.). Input all amounts as positive values.)
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.). Input all amounts as positive values.)
Direct materials: 5 pounds at $10 per pound
$
50
Direct labor: 4 hours at $16 per hour
64
Variable overhead: 4 hours at $7 per hour
28
Total standard cost per unit
$
142
Explanation / Answer
1) Raw Materials cost for Planning Budget = Budgeted units produced*Raw Material cost per unit
= 20,000 units*$50 per unit = $1,000,000
2) Raw Materials cost for Flexible Budget = Actual Units produced*Raw Material cost per unit
= 24,600 units*$50 per unit = $1,230,000
3) Materials Price Variance = (Std Price - Actual Price)*Actual Qty
= ($10 - $7.50)*164,000 pounds = $410,000 F
4) Materials Quantity Variance = (Std Qty - Actual Qty)*Std Price
= [(24,600 units*5 pounds) - 164,000 pounds]*$10 per pound
= (123,000 pounds - 164,000 pounds)*$10 = ($410,000) U
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