Preble Company menufoctures one product. Its variable manufacturing overhead is
ID: 2555031 • Letter: P
Question
Preble Company menufoctures one product. Its variable manufacturing overhead is opplied to production based on direct labor-hours and its stondord cost card per unit is as follows: Direct material: 5 pounds at $10.00 per pound Direct labor: 4 hours at $1700 per hour Variable overhead: 4 hours at $7.00 per hour 50.00 68.00 28.00 Total standord variable cost per unit S 146.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month $220,000 5265,000 riable Cost per Unit Sold Advertising Sales solories and commissions Shipping expenses $16.00 S 5.00 The plonning budget for March was bosed on producing and selling 20,000 units. However, during March the company actuelly produced and sold 24,600 units ond 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 b. Direct-laborers worked 83,000 hours at o rate of $19.00 per hour. c. Total variable manufacturing overhead for the month was $653,220 d. Total advertising, soles salories and commissions, and shipping expenses were $232,000, $653,210, and $143.000, respectively. value: 1.00 points Required 1. What raw materials cost would be included in the company's flexible budget for March? Raw material costExplanation / Answer
1.
Raw material cost that would be included in flexible budget
= Standard cost per unit x Actual unit produced
= $ 50 x 24,600 = $ 1,230,000
2.
Material quantity for actual production = material required per unit x Actual unit produced
= 5 x 24,600 = 123,000 pounds
Materials quantity variance = (Actual Quantity – Standard Quantity) x Standard Price
= (164,000 - 123,000) x $ 10
= 41,000 x $ 10 = $ 410,000 U
3.
Material price variance = (Actual price – Standard price) x Actual quantity
= ($ 7.5 – $ 10) x 164,000
= - $ 2.5 x 164,000 = - $ 410,000 F
4.
Materials quantity variance = (Actual Quantity – Standard Quantity) x Standard Price
= (164,000 - 123,000) x $ 10
= 41,000 x $ 10 = $ 410,000 U
5.
Material price variance = (Actual price – Standard price) x Actual quantity
= ($ 7.5 – $ 10) x 172,000
= - $ 2.5 x 172,000 = - $ 430,000 F
****Answered first (4 +1) questions.
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