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Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows:

Direct materials: 5 kg at $9.00 per kg	$	45.00
Direct labour: 3 hours at $14 per hour		42.00
Variable overhead: 3 hours at $8 per hour		24.00
Total standard cost per unit	$	111.00

The company planned to produce and sell 28,000 units in March. However, during March the company actually produced and sold 34,000 units and incurred the following costs:

1. Purchased 180,000 kg of raw materials at a cost of $8.50 per kg. All of this material was used in production.
2. Direct labour: 69,000 hours at a rate of $15 per hour.
3. Total variable manufacturing overhead for the month was $565,110.

1. What is the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

2. What is the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

3. What is the labour rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Do not round intermediate calculations.)

4. What is the labour efficiency variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Do not round intermediate calculations.)

5. What is the variable overhead spending variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

6. What is the variable overhead rate variance for March? (Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

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Answer 1

Solutions Variance Page! Requirement I: What is the materials paire Variance for March? Materials Price Variance (Standard Price (-) Actual Price ) X Actual Quantity ($9 -- $8.50) x 180.000 kgs $90,000 "F" Fauorable Answert: Material Price Variance = 1690,000 F Requirement 2: What is the materials quantity for March? Materials Quantity Variance Standard Quantity Actual X Standard Quantity) Price =(5kg* 5 kg x 34,000 units) - 180,000 kq) x 8 9 (170,000 kg - 180,000 kg) * $59 $90,000 "U" Unfavorable Auswer 2: Materials Quantity Veliance = $90,000 U = for Actual Output

Requirement 3e what is the labor sate variance to March? Page 2 Labor Rate Variance (Standard Rate cas • Actual fate ) x Actual Hours ($ 14 per have (-) $15 per hour ) X 68,000 hours $ 68,000 "U" Unfauorable Auswer 3: Labor Rate Variance = ($68,000 U/ Requirement y = What is the labor efficiency variance for March? Labor Efficiency Variance Standard Hours Actual ) for Retual outfit Hours Rate ((3 haues X 34,000 wit.) 1–) 69,000 homes) X $14 (102,000 hours its 68,000 hawes ) X 814 $462000 "F" fauorable Ausweale Labor Efficiency Variance = $46000 F Standard 1) X У. z

= 2 Requirement 5. What is the variable overhead Page 3 spending variance for March? Variable Overhead Spending Veriane Standard Howes "Actual Variable X Standard Х for Actual Output Rate - Ovecheads Showe, X 34000 wita) x48) -($565,110 ) $816,000 - $ 565,110 $250,890 "F" Fauorable in Ausurea 5 : Variable Queahead Spending Variance = $250,890 F Requirement 60 What is the variable overhead rate variance for March? Variable Queahead Rate Variance (Standard fate os Artual Rate ) x Actual hours (48 per have to $8.18 per hour ) X 69,000 hours () -$13,110 "U" Unfavorable Answer 6: Variable Querhead $13,110 U Rate Variance 69,000 hours