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.

0
1. 5 August, 11:36
0
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