Preble company manufactures one product. It's variable manufacturing overhead is applied to production basedon direct labor-hours and its standard cost card per unit as follows:

inputs

Standard quantity or hours (1)

standard price or rate (2)

standard cost (1)*(2)

Direct materials

5 pounds

$8.00 per pound

40

direct labor

2 hours

$14 per hours

28

variable overhead

2 hours

$5 per hours

$10

total standard cost per unit

78

The planning budger for march was based on producing and selling 25000 units. However, during March the company actually produced and sold 30,000 units and incurred the

following costs:

a) purchased 160,00 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.

b) diret laborers worked 55,000 hours at a rate of $15.00 per hour.

c) Total variable manufacturing overhead for the month was $280,500.

8) What direct labor cost would be include din the company's flexible budget for March?

9) What is the labor rate variance for March?

8)	Direct labor cost included in flexible budget
	Direct labor:
	Units produced in Flexible Budget (a)
	Direct labor required per unit (b)
	Total direct labor hours needed (a) x (b) = (c )
	Cost per direct labor hour (d)
	Total direct labor cost included in Flexible Budget (c ) x (d)
9)	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 ) x (d)
	* If actual rate paid is greater than standard rate allowed,
	the labor rate variance would be unfavorable and vice versa.