CH8#4

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 $10 per pound	$	50
Direct labor: 4 hours at $16 per hour		64
Variable overhead: 4 hours at $7 per hour		28
Total standard variable cost per unit	$	142

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

	Fixed Cost per Month			Variable Cost per Unit Sold
Advertising	$	220,000
Sales salaries and commissions	$	120,000		$	14.00
Shipping expenses				$	5.00

The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 24,600 units and incurred the following costs:

a.	Purchased 164,000 pounds of raw materials at a cost of $7.5 per pound. All of this material was used in production.
b.	Direct-laborers worked 57,000 hours at a rate of $17 per hour.
c.	Total variable manufacturing overhead for the month was $653,200.
d.	Total advertising, sales salaries and commissions, and shipping expenses were $232,000, $460,000, and $143,000, respectively.

Required:

If Preble had purchased 172,000 pounds of materials at $7.5 per pound and used 164,000 pounds in production, what would be the materials price 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.).)