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 materials: 5 pounds at $9 per pound $ 45 Direct labor: 3 hours at $14 per hour 42 Variable overhead: 3 hours at $8 per hour 24 Total standard cost per unit $ 111 The planning budget for March was based on producing and selling 28,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 180,000 pounds of raw materials at a cost of $8.50 per pound. All of this material was used in production. Direct laborers worked 69,000 hours at a rate of $15 per hour. Total variable manufacturing overhead for the month was $565,110.

9. What is the 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.). Do not round intermediate calculations.)

10. What is the labor 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.). Do not round intermediate calculations.)

11. What is the labor spending 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.). Do not round intermediate calculations.)

15. What is the variable overhead efficiency 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

9)	Direct labor rate variance
	(Actual rate- standard rate)*actual hours
	(15-14)*69,000
	69,000	U
10)	Direct labor Efficiency variance
	(Actual hours - standard hours allowed)*standard rate
	(69,000   - 34000*3)*14
	462000	F
11)	labor spending variance
	462000F - 69000U
	393,000	F
15)	Variable overhead efficiency variance
	(actual hours - standard hours allowed)*standard rate
	(69000 - 34000*3)*8
	264000	F