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**: 4 pounds at $10.00 per pound = $40.00 - **Direct labor**: 2 hours at $16 per hour = $32.00 - **Variable overhead**: 2 hours at $6 per hour = $12.00 - **Total standard variable cost per unit** = $84.00 The company also established the following cost formulas for its selling expenses: | Cost Component | Fixed Cost per Month | Variable Cost per Unit Sold | |---------------------------|----------------------|-----------------------------| | Advertising | $270,000 | | | Sales salaries and commissions | $240,000 | $19.00 | | Shipping expenses | | $10.00 | The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,500 units and incurred the following costs: a. Purchased 150,000 pounds of raw materials at a cost of $9.20 per pound. All of this material was used in production. b. Direct-laborers worked 62,000 hours at a rate of $17.00 per hour. c. Total variable manufacturing overhead for the month was $390,600. d. Total advertising, sales salaries and commissions, and shipping expenses were $280,000, $490,000, and $185,000, respectively. 15. **What is the spending variance related to shipping expenses?** (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input the amount as a positive value.) In the space provided, enter the spending variance related to shipping expenses.
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**: 4 pounds at $10.00 per pound = $40.00 - **Direct labor**: 2 hours at $16 per hour = $32.00 - **Variable overhead**: 2 hours at $6 per hour = $12.00 - **Total standard variable cost per unit** = $84.00 The company also established the following cost formulas for its selling expenses: | Cost Component | Fixed Cost per Month | Variable Cost per Unit Sold | |---------------------------|----------------------|-----------------------------| | Advertising | $270,000 | | | Sales salaries and commissions | $240,000 | $19.00 | | Shipping expenses | | $10.00 | The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,500 units and incurred the following costs: a. Purchased 150,000 pounds of raw materials at a cost of $9.20 per pound. All of this material was used in production. b. Direct-laborers worked 62,000 hours at a rate of $17.00 per hour. c. Total variable manufacturing overhead for the month was $390,600. d. Total advertising, sales salaries and commissions, and shipping expenses were $280,000, $490,000, and $185,000, respectively. 15. **What is the spending variance related to shipping expenses?** (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input the amount as a positive value.) In the space provided, enter the spending variance related to shipping expenses.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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**: 4 pounds at $10.00 per pound = $40.00
- **Direct labor**: 2 hours at $16 per hour = $32.00
- **Variable overhead**: 2 hours at $6 per hour = $12.00
- **Total standard variable cost per unit** = $84.00
The company also established the following cost formulas for its selling expenses:
| Cost Component | Fixed Cost per Month | Variable Cost per Unit Sold |
|---------------------------|----------------------|-----------------------------|
| Advertising | $270,000 | |
| Sales salaries and commissions | $240,000 | $19.00 |
| Shipping expenses | | $10.00 |
The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,500 units and incurred the following costs:
a. Purchased 150,000 pounds of raw materials at a cost of $9.20 per pound. All of this material was used in production.
b. Direct-laborers worked 62,000 hours at a rate of $17.00 per hour.
c. Total variable manufacturing overhead for the month was $390,600.
d. Total advertising, sales salaries and commissions, and shipping expenses were $280,000, $490,000, and $185,000, respectively.
15. **What is the spending variance related to shipping expenses?** (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input the amount as a positive value.)
In the space provided, enter the spending variance related to shipping expenses.
Expert Solution
Step 1
A flexible budget is one that adjusts to the level of activity or volume in a business.In Comparison to static budget, which does not change from the amounts established when the budget was created, a flexible budget "flexes" in response to changes in a business's costs.
When an accounting period ends, actual revenues or other activity measures are entered into the flexible budget, which generates a budget based on the inputs.
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