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:
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Direct material: 5 pounds at $8.00 per pound
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$
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40.00
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Direct labor: 2 hours at $14 per hour
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28.00
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Variable overhead: 2 hours at $5 per hour
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10.00
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Total standard variable cost per unit
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$
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78.00
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The company also established the following cost formulas for its selling expenses:
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Fixed Cost per Month
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Variable Cost per Unit Sold
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Advertising
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$
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200,000
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Sales salaries and commissions
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$
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100,000
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$
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12.00
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Shipping expenses
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$
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3.00
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The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs:
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a.
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Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
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b.
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Direct-laborers worked 55,000 hours at a rate of $15.00 per hour.
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c.
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Total variable manufacturing overhead for the month was $280,500.
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d.
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Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.
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Required:
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9. What variable manufacturing overhead cost would be included in the company?s flexible budget for March?
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Variable manufacturing overhead cost
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$
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10. What is the variable overhead efficiency variance for March? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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Variable overhead efficiency variance
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$
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11. What is the variable overhead rate variance for March? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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Variable overhead rate variance
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$
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12. What amounts of advertising, sales salaries and commissions, and shipping expenses would be included in the company?s flexible budget for March?
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Preble Company
Flexible Budget
For the Month Ended March 31
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Units sold (q)
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30,000
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Expenses:
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Advertising
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$
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Sales salaries and commissions
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$
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Shipping expenses
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$
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13. What is the spending variance related to advertising? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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14. What is the spending variance related to sales salaries and commissions? (Input the amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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Spending variance $
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15. What is the spending variance related to shipping expenses? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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