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: 6 kg at $8.00 per kg $ 48.00 Direct labour: 3 hours at $14 per hour 42.00 Variable overhead: 3 hours at $5 per hour 15.00 Total standard cost per unit $ 105.00 The company planned to produce and sell 19,000 units in March. However, during March the company actually produced and sold 24,000 units and incurred the following costs: Purchased 160,000 kg of raw materials at a cost of $7.20 per kg. All of this material was used in production. Direct labour: 60,000 hours at a rate of $15 per hour. Total variable manufacturing overhead for the month was $336,600. 1. What is the materials price variance for March? What is the materials quantity variance for March? What is the labour rate variance for March? . What is the labour efficiency variance for March? If Preble had purchased 175,000 kg of materials at $7.20 per kg and used 160,000 kg in production, what would be the materials price variance for March?

Answer 1

1. What is the materials price variance for March?

= (8 -7.20)*160000

= 128000 F

2. What is the materials quantity variance for March

=  (24000*6 - 160000)* 8

= 128000 U

3. What is the labour rate variance for March? .

=  (14-15)* 60000

= 60000 U

4. What is the labour efficiency variance for March?

= (24000*3 - 60000)*14

= 168000 F

5. If Preble had purchased 175,000 kg of materials at $7.20 per kg and used 160,000 kg in production, what would be the materials price variance for March?

= (8 -7.20)*175000

= 140000 F