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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 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 spending variance related to advertising? (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.).)

  Spending variance     $

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9965866

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