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5 August, 11:19

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: 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 cost per unit $ 112 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: Purchased 154,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used in production. Direct laborers worked 63,000 hours at a rate of $13 per hour. Total variable manufacturing overhead for the month was $510,930.

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  1. 5 August, 11:36
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    1. Calculation of labor spending variance for the month of march

    Labor spending variance = (Actual rate x actual hours) - (Standard rate x Standard hours)

    = (13 x 63000) - (12 x (26000 x 3))

    =-1,38,600

    Labor spending variance for the month of March is $138600

    2. Calculation of variable manufacturing overhead planning cost

    Variable manufacturing overhead planning cost = (Planning budget units x required hours x cost per hour)

    = (21000 x 3 x7)

    =441,000

    Variable manufacturing overhead planning cost is $441,000

    3. Calculation of Variable manufacturing overhead cost

    Variable manufacturing overhead cost = (Actual units x required hours x cost per hour)

    = (26600 x 3 x7)

    =$558,600

    Variable manufacturing overhead cost is $558,600

    4. Calculation of Variable overhead rate variance

    Variable overhead rate variance = Actual hours (actual rate - standard rate)

    =63000 ((510930/63000) - 8)

    =63000 (8.11-8)

    =63000 (0.11)

    =6930

    Variable overhead rate variance is = 6930
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