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4th question part 4

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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: 4 pounds at $10 per pound$40
Direct labor: 2 hours at $13 per hour
26
Variable overhead: 2 hours at $9 per hour
18
Total standard cost per unit$84

The planning budget for March was based on producing and selling 29,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs:

  1. Purchased 160,000 pounds of raw materials at a cost of $8.50 per pound. All of this material was used in production.

  2. Direct laborers worked 59,000 hours at a rate of $14 per hour.

  3. Total variable manufacturing overhead for the month was $564,040.

13.What variable manufacturing overhead cost would be included in the company’s flexible budget for March?

14. What is the variable overhead rate variance for March?(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.). Input all amounts as positive values.)

15. What is the variable overhead efficiency variance for March? (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.). Input all amounts as positive values.)

Homework Answers

Answer #1

13. The variable manufacturing overhead cost would be included in the company’s flexible budget for March =

34,000 units * 2 hours * $9 per hour

= $612,000

14. Variable overhead rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= $564,040 - (59,000 * $9)

= $33,040 Unfavorable

15. Variable overhead efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (59,000 * $9) - $612,000

= $81,000 Favorable

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