In: Accounting
[The following information applies to the questions displayed below.] |
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: 5 pounds at $8.00 per pound | $ | 40.00 |
Direct labor: 3 hours at $17.00 per hour | 51.00 | |
Variable overhead: 3 hours at $9.00 per hour | 27.00 | |
Total standard variable cost per unit | $ | 118.00 |
The company also established the following cost formulas for its selling expenses: |
Fixed Cost per Month |
Variable Cost per Unit Sold |
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Advertising | $ | 350,000 | ||||
Sales salaries and commissions | $ | 250,000 | $ | 16.00 | ||
Shipping expenses | $ | 4.00 | ||||
The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,000 units and incurred the following costs: |
a. |
Purchased 160,000 pounds of raw materials at a cost of $6.50 per pound. All of this material was used in production. |
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b. | Direct-laborers worked 68,000 hours at a rate of $19.00 per hour. | ||||||||
c. | Total variable manufacturing overhead for the month was $655,200. | ||||||||
d. |
Total advertising, sales salaries and commissions, and shipping expenses were $364,000, $655,520, and $130,000, respectively.
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Req 1: | ||||||
Std qty allowed per unit: 5 pounds | ||||||
Std price per pound: $ 8.00 per pound | ||||||
Actual output: 26000 Units | ||||||
Std quantity allowed (26000*5): 130000 pounds | ||||||
Std material cost for flexible budget: | ||||||
Std quantity allowed: | 130,000 | |||||
Std price per pounds | 8 | |||||
Std material cost for flexible budget: | 1040000 | |||||
Req 2. | ||||||
Actual quantity used: 160000 pounds | ||||||
Actual price per pound: 650 per pound | ||||||
Material Quantity variance: Std price (Std quantity allowed-Actual Qty) | ||||||
8.00 (130000 -160000): $ 240000 Unfav | ||||||
Req 3: | ||||||
Actual quantity used: 160000 pounds | ||||||
Actual price per pound: 650 per pound | ||||||
Material Price Variance: Actual Quantity (Std price -Actual price) | ||||||
160000 (8.00-6.50) = $ 240000 Fav | ||||||
Req 4. | ||||||
Actual Quantity used: 160000 pounds | ||||||
Actual price per pound: $ 6.00 per pound | ||||||
Material Quantity variance: Std price (Std quantity allowed-Actual Qty) | ||||||
8.00 (130000 -160000): $ 240000 Unfav | ||||||
It will remain same as the actual quantity used is same. |