The following information applies to the questions displayed belowj Preble Compa
ID: 2559840 • Letter: T
Question
The following information applies to the questions displayed belowj Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and Its standard cost card per unlt Is as follows: Direct material: 4 pounds at $8.00 per pound 32.00 Direct labor: 2 hours at $12.00 per hour Variable overhead: 2 hours at $6.00 per hour 24.00 12.00 Total standard variable cost per unit 68.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month $320,000 $120,000 Variable Cost per Unit Sold Advertising Sales salaries and commissions Shipping expenses $10.00 3.00 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: a. Purchased 160,000 pounds of raw materials at a cost of $7.40 per pound. All of this material was used in production b. Direct-laborers worked 66,000 hours at a rate of $13.00 per hour. c. Total variable manufacturing overhead for the month was $405,000. d. Total advertising, sales salaries and commissions, and shipping expenses were $321,000, $405.240. and $127,000, respectivelyExplanation / Answer
13. spending varialnce related to advertising = actual advertising expenses - budgeted advertising expenses.
=> $321,000 - 320,000 =>$1,000 U....................(since actual is greater than budgeted we have unfavorable variance).
14.spending variance related to sales salaries and commissions =actual sales and salaries - budgeted sales and salaries
=>actual sales salaries and comissions = $405,240.
budgeted sales salaries and commissions =>$120,000 + [$10 * 37,000 units sold]
=>$120,000 + [$370,000]
=>$490,000.
=> actual sales and salaries commissions - budgeted sales and salaries commission
=>$405,240 - $490,000
=>$84,760....(F)....................(as actual amount is less than budgeted amount, it is favorable).
15.spending variance related to shipping expnses = actual expense - budgeted expense.
here,
actual shipping expnese = $127,000.
budgeted shipping expense = $3.00 * 37,000 units =>$111,000.
spending variance = ($127,000 - 111,000) =>$16,000.(U)......(as acutual expense is greater we have an unfavorable balance).
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