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: 8 pounds at $10.00 per pound | $ 80.00 |
---|---|
Direct labor: 5 hours at $13 per hour | 65.00 |
Variable overhead: 5 hours at $8 per hour | 40.00 |
Total standard variable cost per unit | $ 185.00 |
The company also established the following cost formulas for its selling expenses:
Fixed Cost per Month | Variable Cost per Unit Sold | |
---|---|---|
Advertising | $ 290,000 | |
Sales salaries and commissions | $ 280,000 | $ 21.00 |
Shipping expenses | $ 12.00 |
The planning budget for March was based on producing and selling 15,000 units. However, during March the company actually produced and sold 17,000 units and incurred the following costs:
- Purchased 170,000 pounds of raw materials at a cost of $8.00 per pound. All of this material was used in production.
-
Direct-laborers worked 64,000 hours at a rate of $14.00 per hour.
-
Total variable manufacturing overhead for the month was $513,920.
-
Total advertising, sales salaries and commissions, and shipping expenses were $300,000, $500,000, and $205,000, respectively.
Required:
1. What raw materials cost would be included in the companys flexible budget for March?
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