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 material: 4 pounds at $8.00 per pound	$	32.00
Direct labor: 2 hours at $16 per hour		32.00
Variable overhead: 2 hours at $6 per hour		12.00
Total standard variable cost per unit	$	76.00

The company also established the following cost formulas for its selling expenses:

	Fixed Cost per Month				Variable Cost per Unit Sold
Advertising	$	320,000
Sales salaries and commissions	$	340,000			$	24.00
Shipping expenses					$	15.00

The planning budget for March was based on producing and selling 32,000 units. However, during March the company actually produced and sold 37,000 units and incurred the following costs:

1. Purchased 160,000 pounds of raw materials at a cost of $7.40 per pound. All of this material was used in production.

2. Direct-laborers worked 67,000 hours at a rate of $17.00 per hour.

3. Total variable manufacturing overhead for the month was $422,100.

4. Total advertising, sales salaries and commissions, and shipping expenses were $329,000, $515,000, and $235,000, respectively.

13. What is the spending variance related to advertising?

Answer 1

13)Spending variance related to advertising : Actual -Budgeted

                                        = 329000 - 320000

                                       = 9000 U