Question

# Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct...

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 \$10.00 per pound \$ 40.00 Direct labor: 2 hours at \$16.00 per hour 32.00 Variable overhead: 2 hours at \$6.00 per hour 12.00 Total standard variable cost per unit \$ 84.00 The company also established the following cost formulas for its selling expenses:

Advertising: Fixed cost per month \$270,000 Variable Cost per Unit Sold

Sales salaries and commissions per month \$240,000 \$19.00

Shipping expenses: 10.00

The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,500 units and incurred the following costs:

a. Purchased 150,000 pounds of raw materials at a cost of \$9.20 per pound. All of this material was used in production.
b. Direct laborers worked 62,000 hours at a rate of \$17.00 per hour.
c. Total variable manufacturing overhead for the month was \$390,600.

D. Total advertising, sales salaries and commissions, and shipping expenses were &280,000, \$490,000, and \$185,000 respectively.

What is the materials quantity variance for March?

1. What raw materials cost would be included in the company’s planning budget for March?

Raw material cost =

2. What raw materials cost would be included in the company’s flexible budget for March?

Raw material cost =

 Material Quantity variance Std qty allowed per unit of output 4 Actual output 34500 Std qty allowed (34500*4) 138000 Std price per unit 10 Actual Qty purchased and used 150000 Material Quantity Variance = Std price (Std qty allowed - Actual qty used) 10 (138000-150000) = 120000 Unfav Req 1. Units planned to produce 30000 Multiply: Std qty allowed per unit 4 TotalStd qty allowed 120000 Multiply: Std price 10 Raw material cost in Planning budget 12,00,000 Req 2. Units actualy produced 34500 Multiply: Std qty allowed per unit 4 TotalStd qty allowed 138000 Multiply: Std price 10 Raw material cost in Flexible budget 13,80,000

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