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.

Explanation:

1. Calculation of labor spending variance for the month of march

Labor spending variance = (Actual rate x actual hours)- (Standard rate x Standard hours)

=(13 x 63000) - (12 x (26000 x 3))

=-1,38,600

Labor spending variance for the month of March is $138600

2.Calculation of variable manufacturing overhead planning cost

Variable manufacturing overhead planning cost= (Planning budget units x required hours x cost per hour)

=(21000 x 3 x7)

=441,000

Variable manufacturing overhead planning cost is $441,000

3. Calculation of Variable manufacturing overhead cost

Variable manufacturing overhead  cost= (Actual units x required hours x cost per hour)

=(26600 x 3 x7)

=$558,600

Variable manufacturing overhead  cost is $558,600

4. Calculation of Variable overhead rate variance

Variable overhead rate variance= Actual hours ( actual rate - standard rate)

=63000((510930/63000)-8)

=63000(8.11-8)

=63000(0.11)

=6930

Variable overhead rate variance is =6930

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