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 $9.00 per pound Direct labor: 3 hours at $15 per hour Variable overhead: 3 hours at $6 per hour Total standard variable cost per unit The company also established the following cost formulas for its selling expenses: Advertising Sales salaries and commissions Shipping expenses Fixed Cost per Month $36.00 45.00 18.00 $99.00 $ 210,000 $ 120,000 Variable Cost per Unit Sold $ 13.00 $ 4.00 The planning budget for March was based on producing and selling 26,000 units. However, during March the company actually produced and sold 31,000 units and incurred the following costs: a. Purchased 155,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production. b. Direct-laborers worked 56,000 hours at a rate of $16.00 per hour. c. Total variable manufacturing overhead for the month was $524,720. d. Total advertising, sales salaries and commissions, and shipping expenses were $220,000, $460,000, and $125,000, respectively. If Preble had purchased 171,000 pounds of materials at $7.20 per pound and use 55,000 pounds in production, what would be the materials quantity variance for arch? (Indicate the effect of each variance by selecting "F" for favorable, "U" fc favorable, and "None" for no effect (ie zero variance) Input the amount
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 $9.00 per pound Direct labor: 3 hours at $15 per hour Variable overhead: 3 hours at $6 per hour Total standard variable cost per unit The company also established the following cost formulas for its selling expenses: Advertising Sales salaries and commissions Shipping expenses Fixed Cost per Month $36.00 45.00 18.00 $99.00 $ 210,000 $ 120,000 Variable Cost per Unit Sold $ 13.00 $ 4.00 The planning budget for March was based on producing and selling 26,000 units. However, during March the company actually produced and sold 31,000 units and incurred the following costs: a. Purchased 155,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production. b. Direct-laborers worked 56,000 hours at a rate of $16.00 per hour. c. Total variable manufacturing overhead for the month was $524,720. d. Total advertising, sales salaries and commissions, and shipping expenses were $220,000, $460,000, and $125,000, respectively. If Preble had purchased 171,000 pounds of materials at $7.20 per pound and use 55,000 pounds in production, what would be the materials quantity variance for arch? (Indicate the effect of each variance by selecting "F" for favorable, "U" fc favorable, and "None" for no effect (ie zero variance) Input the amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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 $9.00 per pound
Direct labor: 3 hours at $15 per hour
Variable overhead: 3 hours at $6 per hour
Total standard variable cost per unit
The company also established the following cost formulas for its
selling expenses:
Advertising
Sales salaries and commissions
Shipping expenses
Fixed Cost
per Month
$36.00
45.00
18.00
$99.00
$ 210,000
$ 120,000
Variable
Cost per
Unit Sold
Materials quantity variance
$ 13.00
$ 4.00
The planning budget for March was based on producing and selling
26,000 units. However, during March the company actually produced
and sold 31,000 units and incurred the following costs:
a. Purchased 155,000 pounds of raw materials at a cost of $7.20 per
pound. All of this material was used in production.
b. Direct-laborers worked 56,000 hours at a rate of $16.00 per hour.
c. Total variable manufacturing overhead for the month was
$524,720.
d. Total advertising, sales salaries and commissions, and shipping
expenses were $220,000, $460,000, and $125,000, respectively.
4. If Preble had purchased 171,000 pounds of materials at $7.20 per pound and used
155,000 pounds in production, what would be the materials quantity 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.). Input the amount as a
positive value.)
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