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 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs:

Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.

Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.

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

2.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.).)

3.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.).)

4.If Preble had purchased 170,000 pounds of materials at $7.50 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 170,000 pounds of materials at $7.50 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.).)

6.What direct labor cost would be included in the company’s flexible budget for March?

7.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.).)

8.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.).)

9.What variable manufacturing overhead cost would be included in the company’s flexible budget for March?

10. 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.).)

Explanation / Answer

Solution 1:

Raw material cost to be included in company flexible budget = SQ for actual production * Standard price per unit

= (30000 * 5) * $8 = $1,200,000

Solution 2:

Standard quantity of material = 30000 * 5 = 150000 pound

Actual quantity of material consumed = 160000 pound

Standard price of material = $8 per pound

Direct material quantity variance = (SQ - AQ) * SP = (150000 - 160000) * $8 = $80,000 U

Solution 3:

Actual price of material = $7.50 per pound

Direct material price variance = (SP - AP) * AQ Purchased = ($8 - $7.50) * 160000 = $80,000 F

Solution 4:

If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 pounds in production then material quantity variance will remain the same as actual quantity consumed is not changed.

Hence direct material quantity variance = (SQ - AQ) * SP = (150000 - 160000) * $8 = $80,000 U

Solution 5:

If Preble had purchased 170,000 pounds of materials at $7.50 per pound and used 160,000 pounds in production then

Material price variance = (SP - AP) * AQ Purchased = ($8 - $7.50) * 170000 = $85,000 F

Note: I have answered sufficent parts as per chegg policy. Kindly post separate question for answer of remaining parts.

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