Question

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows: Direct materials: 5 kg at $10.00 per kg $ 50.00 Direct labour: 4 hours at $16 per hour 64.00 Variable overhead: 4 hours at $7 per hour 28.00 Total standard cost per unit $ 142.00 The company planned to produce and sell 20,000 units in March. However, during March the company actually produced and sold 24,600 units and incurred the following costs: Purchased 164,000 kg of raw materials at a cost of $7.50 per kg. All of this material was used in production. Direct labour: 57,000 hours at a rate of $17 per hour. Total variable manufacturing overhead for the month was $653,220.

7. What is the variable overhead spending variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

Answer 1

• Requirement asked [7]

Variable Overhead Spending Variance
(	Standard Cost = 24600 units x $ 28	-	Actual Cost	)
(	$                  688,800.00	-	$          653,220.00	)
	35580
	Variance		$            35,580.00			Favourable-F