Question
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
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 $10.00 per pound$50.00Direct labor: 2 hours at $15 per hour30.00Variable overhead: 2 hours at $5 per hour10.00Total standard variable cost per unit$90.00
The company also established the following cost formulas for its selling expenses:
Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$400,000Sales salaries and commissions$500,000$32.00Shipping expenses$23.00
The planning budget for March was based on producing and selling 32,000 units. However, during March the company actually produced and sold 37,600 units and incurred the following costs:
- Purchased 200,000 pounds of raw materials at a cost of $9.40 per pound. All of this material was used in production.
- Direct-laborers worked 50,000 hours at a rate of $16.00 per hour.
- Total variable manufacturing overhead for the month was $558,750.
- Total advertising, sales salaries and commissions, and shipping expenses were $407,000, $555,000, and $315,000, respectively.
6. What direct labor cost would be included in the company's flexible budget for March?
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