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 as follows: Direct materials: 6 pounds at $8 per pound$48 Direct labor: 4 hours at $13 per hour 52 Variable overhead: 4 hours at $5 per hour 20 Total standard cost per unit$120 The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 25,500 units and incurred the following costs: Purchased 170,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production. Direct laborers worked 73,000 hours at a rate of $14 per hour. Total variable manufacturing overhead for the month was $427,050. rev: 11_20_2017_QC_CS-109672

Answer 1

Answer:

Materials:

price variance  $136,000.00 favorable

quantity variance  $136,000.00 unfavorable

Total variance : zero

LABOR:

total variance:  304,000 favorable

Rate  73,000 unfavorable

Efficiency 377,000 Favorable

Questions:

Which are the Direct Materials and Labor Variance?

Explanation:

DIRECT MATERIALS VARIANCES

$(standard\:cost-actual\:cost) \times actual \: quantity= DM \: price \: variance$

std cost  $8.00

actual cost  $7.20

quantity 170,000

difference  $0.80

price variance  $136,000.00

$(standard\:quantity-actual\:quantity) \times standard \: cost = DM \: quantity \: variance$

std quantity 153000.00 (25,500 units x 6 pounds each)

actual quantity 170000.00

std cost  $8.00

difference -17000.00

quantity variance  $(136,000.00)

DIRECT labor VARIANCES

$(standard\:rate-actual\:rate) \times actual \: hours = DL \: rate \: variance$

std rate  $13.00

actual rate  $14.00

actual hours 73,000

difference  $(1.00)

rate variance  $(73,000.00)

$(standard\:hours-actual\:hours) \times standard \: rate = DL \: efficiency \: variance$

std  hours 102,000.00 (25,500 hours x 4 DL hours each)

actual hours 73,000.00

std rate  $13.00

difference 29000.00

efficiency variance  $377,000.00

total variance:  377,000 - 73,000 = 304,000