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 materials: 4 pounds at $9 per pound | $ | 36 |
Direct labor: 3 hours at $12 per hour | 36 | |
Variable overhead: 3 hours at $8 per hour | 24 | |
Total standard cost per unit | $ | 96 |
The planning budget for March was based on producing and selling 28,000 units. However, during March the company actually produced and sold 33,000 units and incurred the following costs: |
a. | Purchased 165,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production. | ||
b. | Direct laborers worked 58,000 hours at a rate of $13 per hour. | ||
c. | Total variable manufacturing overhead for the month was $729,060.
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2. | What raw materials cost would be included in the companys flexible budget for March? |
3. | What is the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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