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:

Direct material: 4 pounds at $9.00 per pound	$	36.00
Direct labor: 3 hours at $12 per hour		36.00
Variable overhead: 3 hours at $8 per hour		24.00
Total standard variable cost per unit	$	96.00

The company also established the following cost formulas for its selling expenses:

	Fixed Cost per Month				Variable Cost per Unit Sold
Advertising	$	230,000
Sales salaries and commissions	$	160,000			$	15.00
Shipping expenses					$	6.00

The planning budget for March was based on producing and selling 28,000 units. However, during March the company actually produced and sold 33,000 units and incurred the following costs:

Purchased 165,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production.

Direct-laborers worked 58,000 hours at a rate of $13.00 per hour.

Total variable manufacturing overhead for the month was $729,060.

Total advertising, sales salaries and commissions, and shipping expenses were $240,000, $470,000, and $145,000, respectively.

8. What is the direct labor rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)

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? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)

11. What is the variable overhead rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)

12. What amounts of advertising, sales salaries and commissions, and shipping expenses would be included in the company’s flexible budget for March?

13. What is the spending variance related to advertising? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)

14. What is the spending variance related to sales salaries and commissions? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)

15. What is the spending variance related to shipping expenses? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)

Answer 1

8)	Direct labor cost included in company's flexible budget
	actual output * standard cost per unit
	34000*42
	1428000

9)	Variable manufacturing included in company's flexible budget
	actual output * standard cost per unit
	33000*24
	792000

10)	Variable overhead efficiency variance
	(actual hours - standard hours allowed)*standard rate
	(58000 - 33000*3)*8
	328000	F
11) Variable overhead rate variance (actual rate - standard rate)*actual hours (729,,060 - 58000*8) 265060 U 12) Advertising,Sales salaries and commissionand shipping expense flexible budget variable Fixed total Advertising 0 230,000 230000 Sales,salaries &comm(24600*16) (33000*15) 495000 160,000 655000 Shipping expense (33000*6)) 198000 0 198000 13) Spending variance to advertising Actual advertisng expense - flxeible budget 240,000-230000 10000 U 14) spending variance related to sales ,salaries and commission aCtual - flexible 470,000 -655000 185000 F 15) Spending variance related to shipping expense Actual- flexibe; 145000-198000 53000 U