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: 4 pounds at $8 per pound $ 32
Direct labor: 2 hours at $16 per hour 32
Variable overhead: 2 hours at $6 per hour 12
Total standard cost per unit $ 76
The planning budget for March was based on producing and selling 32,000 units. However, during March the company actually produced and sold 37,000 units and incurred the following costs:
a. Purchased 160,000 pounds of raw materials at a cost of $7.40 per pound. All of this material was used in production.
b. Direct laborers worked 67,000 hours at a rate of $17 per hour.
c. Total variable manufacturing overhead for the month was $422,100.
Required:
1. What raw materials cost would be included in the company's planning budget for March?2. What raw materials cost would be included in the company's flexible budget for March?3. What is the materials price variance for March?4. What is the materials quantity variance for March?

Material cost for planning budget  =$1,024,000

Material cost flexible budget =$1,184,000

Material price variance $96,000  favorable

Quantity variance       $96,000  unfavorable

Explanation:

Material cost for planning budget =  $32 × 32,000 =$1024000

Material cost flexible budget = $32× 37,000 =$1184000

Material price variance:                                                               $

160,000 pounds should have cost ( 160,000 × $8.00)     1,280,000

but did cost ( 160,000× $7.40)                                             1,184,000

Material price variance                                                         96000  favorable

Material quantity variance

                                                                                             pounds

37,000 units should have used (37,000 × 4 pounds)     148,000

but did take                                                                        160,000

Variance                                                                              12000  unfavorable

standard price                                                                 × $8.00

Quantity variance                                                             $96,000  unfavorable

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