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B D M N P F G 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: 10 (2) Standard Standard Standard Quantity Price Cost or Hours or Rate (1) (2) 5 pounds $8.00 por pound $4000 2 hours $14 por hour 28.00 2 hours $5 por hour 10.00 $78.00 Inputs Direct materials Direct labor Variable overhead Total standard cost per unit 18 9 10 11 12 13 14 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: TS 16 17 18 18 2. Purchased 160,000 pounds of raw materials at a cost of S7.50 per pound. All of this material was used in production. b. Direct laborers worked 55,000 hours at a rate of $15.00 per hour c. Total variable manufacturing overhead for the month was $280,500. 20 59) 16 17 18 Labor rate variance for March: AH (AR-SR) Actual rate/hour (a) Standard rate/hour (b) Variance (a) - (b)(c) Actual quantity of direct labor used (d) *Labor rate variance (c)(d) 15 14 19 20 1 55000 55000 Unfavorable 21 22 23 If actual rate paid is greater than standard rate allowed, the labor rate variance would be unfavorable and vice versa. 24 25 10) Labor efficiency variance for March SR (AH-SH) Actual quantity of direct labor used (a) Standard quantity allowed (b) Variance (a) - (b) =(c) Standard rate/hour (d) **Labor efficiency variance (c) x (d) 60000 55000 5000 14 70000 Favorable 1 ** If actual quantity of direct labor used exceed standard quantity labor efficiency variance would be unfavorable and vice versa. direct labor allowed, ** If actual quantity of direct labor used exceed standard quantity of direct labor allow labor efficiency variance would be unfavorable and vice versa. 11) Labor spending variance for March. Labor rate variance (a) Labor efficiency variance (b) Labor spending variance (a) - (b) 70000 55000 15000 Favorable 8 12. What variable manufacturing overhead cost would be included in the company's planning budget for March? D Variable manufacturing overhead included in Planning Budget: Units produced in planning budget (a) Number of direct labor hours /unit (b) Total direct labor hours required (a) (b)= (c) Standard variable mfg. OH cost/direct labor hour (d) Variable manufacturing overhead included in Planning Budget (c)(d) 25000 10 250000 3