The following Information applies to the questions displayed below.j Preble Comp
ID: 2565446 • Letter: T
Question
The following Information applies to the questions displayed below.j 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 materlal: 5 pounds at $10.00 per pound 50.00 Direct labor: 3 hours at $13.00 per hour Varlable overhead: 3 hours at $4.00 per hour 39.00 12.00 Total standard varlable cost per unit $101.00 The company also established the following cost formulas for Its selling expenses: Fixed Cost per Month $390,000 $120,000 Varlable Cost per Unlt Sold Advertising Sales salarles and commissions Shlpping expenses $10.00 $ 3.00 The planning budget for March was based on producing and selling 29,000 units. However, during March the company actually produced and sold 34,200 units and Incurred the following costs: a. Purchased 180,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used In production. b. DIrect-laborers worked 95,000 hours at a rate of $14.00 per hour. c. Total varlable manufacturing overhead for the month was $390,000. d. Total advertising, sales salarles and commissions, and shlpping expenses were $392,000, $390,450, and $134,000, respectivelyExplanation / Answer
5 Materials price variance = 189000*(9.5-10)= 94500 Favorable 6 Direct labor cost = 34200*39= 1333800 7 labor efficiency variance = 13*(95000-34200*3)= 98800 Favorable 8 Labor rate variance = 95000*(14-13)= 95000 Unfavorable Note: Materials price variance is calculated at the point of purchase In other case, Materials price variance = 180000*(9.5-10)=90000 Unfavorable