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 materials: 5 pounds at $11 per pound $ 55 Direct labor: 3 hours at $12 per hour 36 Variable overhead: 3 hours at $7 per hour 21 Total standard cost per unit $ 112 The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,600 units and incurred the following costs: * Purchased 154,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used in production. * Direct laborers worked 63,000 hours at a rate of $13 per hour. * Total variable manufacturing overhead for the month was $510,930. Foundational 10-11 (Algo) 11. What is the labor spending variance for March? Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 materials: 5 pounds at $11 per pound $ 55 Direct labor: 3 hours at $12 per hour 36 Variable overhead: 3 hours at $7 per hour 21 Total standard cost per unit $ 112 The planning budget for March was based on producing and selling 21,000 units. However, during March the company actually produced and sold 26,600 units and incurred the following costs: * Purchased 154,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used in production. * Direct laborers worked 63,000 hours at a rate of $13 per hour. * Total variable manufacturing overhead for the month was $510,930. Foundational 10-11 (Algo) 11. What is the labor spending variance for March? Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.
Expert Solution
Step 1: Introduction:

Variance arises when the actual costs  differ from the standard costs. 

The results are favorable when the actual costs are less than the standard costs and are unfavorable when the actual costs are more than the standard costs.

Direct labor cost is the amount paid to the labor to convert the raw material into final product.

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