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: 4 pounds at $10.00 per pound | $ 40.00 |
---|---|
Direct labor: 2 hours at $16 per hour | 32.00 |
Variable overhead: 2 hours at $6 per hour | 12.00 |
Total standard variable cost per unit | $ 84.00 |
The company also established the following cost formulas for its selling expenses:
Fixed Cost per Month | Variable Cost per Unit Sold | |
---|---|---|
Advertising | $ 270,000 | |
Sales salaries and commissions | $ 240,000 | $ 19.00 |
Shipping expenses | $ 10.00 |
The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,500 units and incurred the following costs:
a. Purchased 150,000 pounds of raw materials at a cost of $9.20 per pound. All of this material was used in production.
b. Direct-laborers worked 62,000 hours at a rate of $17.00 per hour.
c. Total variable manufacturing overhead for the month was $390,600.
d. Total advertising, sales salaries and commissions, and shipping expenses were $280,000, $490,000, and $185,000, respectively.
2. What is the materials quantity variance for March?
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