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 $11 per pound | $ | 55 |
Direct labor: 3 hours at $12 per hour | 36 | |
Variable overhead: 3 hours at $7 per hour | 21 | |
Total standard variable cost per unit | $ | 112 |
The company also established the following cost formulas for its selling expenses: |
Fixed Cost per Month | Variable Cost per Unit Sold | |||||
Advertising | $ | 280,000 | ||||
Sales salaries and commissions | $ | 180,000 | $ | 10.00 | ||
Shipping expenses | $ | 4.00 | ||||
The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,600 units and incurred the following costs: |
a. | Purchased 154,000 pounds of raw materials at a cost of $9.5 per pound. All of this material was used in production. |
b. | Direct-laborers worked 63,000 hours at a rate of $13 per hour. |
c. | Total variable manufacturing overhead for the month was $511,200. |
d. | Total advertising, sales salaries and commissions, and shipping expenses were $286,000, $441,000, and $123,000, respectively. |
Required: |
What is the spending variance related to advertising? (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.).)
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started