Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Question:89
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: 5 pounds at $9 per pound
$ 45
Direct labor: 3 hours at $14 per hour
$ 42
Variable overhead: 3 hours at $9 per hour
$ 27
Total standard variable cost per unit
$ 114
The company also established the following cost formulas for its selling
expenses:
Advertising
Sales salaries and
Shipping expenses
Fixed Cost per
Month
Variable Cost per Unit
Sold
$ 3,00,000
$ 2,00,000
$ 12
$4
The planning budget for March was based on producing and selling
20,000 units. However, during March the company actually produced
and sold 24,800 units and incurred the following costs:
a. Purchased 155,000 pounds of raw materials at a cost of $7.2 per
pound. All of this material was used in production.
b. Direct laborers worked 65,000 hours at a rate of $15 per hour.
c. Total variable manufacturing overhead for the month was $612,000.
d. Total advertising, sales salaries, commissions, and shipping
expenses were $308,000, $480,000, and $106,000,
respectively.Required:What is the spending variance related to
advertising?
Accounting records indicate certain balances in the inventory accounts
for 20xx:
1/1/xx
31/12/xx
Materials inventory
$ 25,000 $12,000
Inventory of products in process (Work in
-0-
$23,000
$10,000 $25,000
Inventory of finished products
Other data (apply to the period from 1/1/xx to 31/12/xx) are:
1. The prime costs were $393,000.
2. Ten times the amount of what was in stock inventory at the beginning
of the year was purchased in materials.
3. Costs of direct labor (direct labor), which represent 40% of the
conversion costs, were $325,000.
4. The company generates, on average, a 20% gross profit (Gross
margin).
Calculate the following item for 20xx: Cost of materials used (direct
materials used).
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Transcribed Image Text:Question:89 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: 5 pounds at $9 per pound $ 45 Direct labor: 3 hours at $14 per hour $ 42 Variable overhead: 3 hours at $9 per hour $ 27 Total standard variable cost per unit $ 114 The company also established the following cost formulas for its selling expenses: Advertising Sales salaries and Shipping expenses Fixed Cost per Month Variable Cost per Unit Sold $ 3,00,000 $ 2,00,000 $ 12 $4 The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 24,800 units and incurred the following costs: a. Purchased 155,000 pounds of raw materials at a cost of $7.2 per pound. All of this material was used in production. b. Direct laborers worked 65,000 hours at a rate of $15 per hour. c. Total variable manufacturing overhead for the month was $612,000. d. Total advertising, sales salaries, commissions, and shipping expenses were $308,000, $480,000, and $106,000, respectively.Required:What is the spending variance related to advertising? Accounting records indicate certain balances in the inventory accounts for 20xx: 1/1/xx 31/12/xx Materials inventory $ 25,000 $12,000 Inventory of products in process (Work in -0- $23,000 $10,000 $25,000 Inventory of finished products Other data (apply to the period from 1/1/xx to 31/12/xx) are: 1. The prime costs were $393,000. 2. Ten times the amount of what was in stock inventory at the beginning of the year was purchased in materials. 3. Costs of direct labor (direct labor), which represent 40% of the conversion costs, were $325,000. 4. The company generates, on average, a 20% gross profit (Gross margin). Calculate the following item for 20xx: Cost of materials used (direct materials used).
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