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:
a. Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
b. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour.
c. Total variable manufacturing overhead for the month was $280,500.
d. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.
Required:
What is the materials quantity variance for March? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
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So, I assume that $40 per unit means that the answer should be 40(30,000-25,000) = 200,000 U. But, aside from the U, it marks my answer as incorrect. What have I done wrong?
EDIT: I also tried using the 160,000 - 125,000 = 35,000 x 8 = 280,000 but that was also incorrect.
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:
a. Purchased 160,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.
b. Direct-laborers worked 55,000 hours at a rate of $15.00 per hour.
c. Total variable manufacturing overhead for the month was $280,500.
d. Total advertising, sales salaries and commissions, and shipping expenses were $210,000, $455,000, and $115,000, respectively.
Required:
What is the materials quantity variance for March? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
---
So, I assume that $40 per unit means that the answer should be 40(30,000-25,000) = 200,000 U. But, aside from the U, it marks my answer as incorrect. What have I done wrong?
EDIT: I also tried using the 160,000 - 125,000 = 35,000 x 8 = 280,000 but that was also incorrect.
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