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 Direct labor: 2 hours at $16 per hour Variable overhead: 2 hours at $6 per hour $40.00 32.00 12.00 $84.00 Total standard variable cost per unit

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
## Flexible Budgets and Cost Analysis

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours, and its standard cost 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:

| Expense                          | Fixed Cost per Month | Variable Cost per Unit Sold |
|----------------------------------|----------------------|-----------------------------|
| Advertising                      | $270,000             | $0                          |
| Sales salaries and commissions   | $240,000             | $19.00                      |
| Shipping expenses                | $0                   | $19.00                      |

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.

### Question

9. What variable manufacturing overhead cost would be included in the company's flexible budget for March?

### Explanation

The flexible budget formulas adjust for actual activity levels. The variable manufacturing overhead in the flexible budget would be calculated based on the actual production levels for March (34,500 units). Specific calculations would be necessary to determine the precise amount included for variable manufacturing overhead in the flexible budget.
Transcribed Image Text:## Flexible Budgets and Cost Analysis Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours, and its standard cost 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: | Expense | Fixed Cost per Month | Variable Cost per Unit Sold | |----------------------------------|----------------------|-----------------------------| | Advertising | $270,000 | $0 | | Sales salaries and commissions | $240,000 | $19.00 | | Shipping expenses | $0 | $19.00 | 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. ### Question 9. What variable manufacturing overhead cost would be included in the company's flexible budget for March? ### Explanation The flexible budget formulas adjust for actual activity levels. The variable manufacturing overhead in the flexible budget would be calculated based on the actual production levels for March (34,500 units). Specific calculations would be necessary to determine the precise amount included for variable manufacturing overhead in the flexible budget.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education