The Foundational 15 (Static) [LO9-1, LO9-2, LO9-4, LO9-5, LO9-6] Skip to question [The following information applies to the questions displayed below.] 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 $8.00 per pound $ 40.00 Direct labor: 2 hours at $14 per hour 28.00 Variable overhead: 2 hours at $5 per hour 10.00 Total standard variable cost per unit $ 78.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month Variable Cost per Unit Sold Advertising $ 200,000 Sales salaries and commissions $ 100,000 $ 12.00 Shipping expenses $ 3.00 The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs: Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour. Total variable manufacturing overhead for the month was $280,500. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively. Foundational 9-13 (Static) 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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The Foundational 15 (Static) [LO9-1, LO9-2, LO9-4, LO9-5, LO9-6]

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[The following information applies to the questions displayed below.]

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 $8.00 per pound	$ 40.00
Direct labor: 2 hours at $14 per hour	28.00
Variable overhead: 2 hours at $5 per hour	10.00
Total standard variable cost per unit	$ 78.00

The company also established the following cost formulas for its selling expenses:

	Fixed Cost per Month	Variable Cost per Unit Sold
Advertising	$ 200,000
Sales salaries and commissions	$ 100,000	$ 12.00
Shipping expenses		$ 3.00

The planning budget for March was based on producing and selling 25,000 units. However, during March the company actually produced and sold 30,000 units and incurred the following costs:

Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
Direct-laborers worked 55,000 hours at a rate of $15.00 per hour.
Total variable manufacturing overhead for the month was $280,500.
Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.

Foundational 9-13 (Static)

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.)

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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