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 $10.00 per pound Direct labor: 3 hours at $17 per hour Variable overhead: 3 hours at $7 per hour Total standard variable cost per unit $ 50.00 51.00 21.00 $ 122.00 The company also established the following cost formulas for its selling expenses: Variable Cost per Unit Sold Advertising Sales salaries and commissions Shipping expenses Fixed Cost per Month $ 330,000 $360,000 $ 25.00 $ 16.00 The planning budget for March was based on producing and selling 24,000 units. However, during March the company actually produced and sold 30,600 units and incurred the following costs: a. Purchased 170,000 pounds of raw materials at a cost of $9.00 per pound. All of this material was used in production. b. Direct-laborers worked 68,000 hours at a rate of $18.00 per hour. c. Total variable manufacturing overhead for the month was $512,040. d. Total advertising, sales salaries and commissions, and shipping expenses were $340,000, $520,000, and $245,000, respectively. 3. What is the spending variance related to advertising? (Indicate the effect of each variance by selecting "F" for favorable, "U" for infavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
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 $10.00 per pound Direct labor: 3 hours at $17 per hour Variable overhead: 3 hours at $7 per hour Total standard variable cost per unit $ 50.00 51.00 21.00 $ 122.00 The company also established the following cost formulas for its selling expenses: Variable Cost per Unit Sold Advertising Sales salaries and commissions Shipping expenses Fixed Cost per Month $ 330,000 $360,000 $ 25.00 $ 16.00 The planning budget for March was based on producing and selling 24,000 units. However, during March the company actually produced and sold 30,600 units and incurred the following costs: a. Purchased 170,000 pounds of raw materials at a cost of $9.00 per pound. All of this material was used in production. b. Direct-laborers worked 68,000 hours at a rate of $18.00 per hour. c. Total variable manufacturing overhead for the month was $512,040. d. Total advertising, sales salaries and commissions, and shipping expenses were $340,000, $520,000, and $245,000, respectively. 3. What is the spending variance related to advertising? (Indicate the effect of each variance by selecting "F" for favorable, "U" for infavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
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: 5 pounds at $10.00 per pound
Direct labor: 3 hours at $17 per hour
Variable overhead: 3 hours at $7 per hour
Total standard variable cost per unit
The company also established the following cost formulas for its selling expenses:
Variable
Cost per
Unit Sold
Advertising
Sales salaries and commissions
Shipping expenses
Fixed Cost
per Month
$ 330,000
$360,000
$ 50.00
51.00
21.00
$ 122.00
$ 25.00
$ 16.00
The planning budget for March was based on producing and selling 24,000 units. However, during March the company
actually produced and sold 30,600 units and incurred the following costs:
a. Purchased 170,000 pounds of raw materials at a cost of $9.00 per pound. All of this material was used in production.
b. Direct-laborers worked 68,000 hours at a rate of $18.00 per hour.
c. Total variable manufacturing overhead for the month was $512,040.
d. Total advertising, sales salaries and commissions, and shipping expenses were $340,000, $520,000, and $245,000,
respectively.
13. What is the spending variance related to advertising? (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.)
Spending variance related to advertising
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