Preble Company manufactures one product. Its varlable manufacturing overhead is

Question

Preble Company manufactures one product. Its varlable manufacturing overhead is applied to productlon based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $10.00 per pound Direct labor: 3 hours at $17.00 per hour Variable overhead: 3 hours at $6.00 per hour 50.00 51.00 8.00 Total standard variable cost per unlt 119.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Variable Cost Monthper Unit Sold Advertising Sales salaries and commissions Shipping expenses $330,000 $130,000 $15.00 $ 4.00 The planning budget for March was based on producing and selling 24,000 units. However, during March the company actually produced and sold 30,600 units and incurred the following costs a. Purchased 170,000 pounds of raw materials at a cost of $9.00 per pound. All of this material was used in production b. Direct-laborers worked 82,000 hours at a rate of $18.00 per hour c. Total variable manufacturing overhead for the month was $505,000. d. Total advertisin g. sales salaries and commissions, and shipping expenses were $337000, $505,120, and $128,000, respectively

Explanation / Answer

1)Raw material cost= Standard quantiy*standard price
=(5*30600)*10
=1530000

2)material quantity variance=SP(AQ-Sq)  
SP=standard price
AQ= actual qunatity used
SQ=STANDARD QUANTITY ALLOWED
=10*(170000-(30600*5))
=170000 and it is U

3)material price variance=(PQ*AP)-(PQ*SP)
PQ=Actual material
AP=Actual price
SP=standard price
=170000*(9-10)
=170000 and it is F

4)material quantity variance=SP(AQ-Sq)  
SP=standard price
AQ= actual qunatity used
SQ=STANDARD QUANTITY ALLOWED
=10*(170000-(30600*5))
=170000 and it is U

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