The Foundational 15 [LO9-1, LO9-2, LO9-4, LO9-5, LO9-6]

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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 $8.00 per pound	$	40.00
Direct labor: 3 hours at $15 per hour		45.00
Variable overhead: 3 hours at $9 per hour		27.00
Total standard variable cost per unit	$	112.00

The company also established the following cost formulas for its selling expenses:

	Fixed Cost per Month				Variable Cost per Unit Sold
Advertising	$	350,000
Sales salaries and commissions	$	400,000			$	27.00
Shipping expenses					$	18.00

The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,000 units and incurred the following costs:

1. Purchased 160,000 pounds of raw materials at a cost of $6.50 per pound. All of this material was used in production.

2. Direct-laborers worked 70,000 hours at a rate of $16.00 per hour.

3. Total variable manufacturing overhead for the month was $655,200.

4. Total advertising, sales salaries and commissions, and shipping expenses were $358,000, $530,000, and $265,000, respectively.

rev: 11_16_2018_QC_CS-146879

Foundational 9-1

Required:

1. What raw materials cost would be included in the companys flexible budget for March?