Question

The Foundational 15 [L09-1, LO9-2, L09-4, LO9-5, L09-6) [The following information applies to the questions displayed below.) 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 Direct labor: 2 hours at $14 per hour 28.00 Variable overhead: 2 hours at $5 per 10.00 hour Total standard variable cost per unit $78.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month $200,000 $100,000 Variable Cost per Unit Sold Advertising Sales salaries and commissions Shipping expenses $12.00 $ 3.00 The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs: a. Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. b. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour. c. Total variable manufacturing overhead for the month was $280,500. d. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.

Answer 1

12) Amount in Flexible budget

Advertising	200000
Sales salaries and commission (100000+30000*12)	460000
Shipping expense (30000*3)	90000

13) Spending variance for advertising = 200000-210000 = 10000 U

14) Spending variance for sales salaries and commission = 460000-455000 = 5000 F

15) Spending variance for shipping expense = 90000-115000 = 25000 U