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: 6 pounds at $8.00 per pound $ 48.00
Direct labor: 4 hours at $16.00 per hour 64.00
Variable overhead: 4 hours at $4.00 per hour 16.00
Total standard variable cost per unit $ 128.00
The company also established the following cost formulas for its selling expenses:
Fixed Cost per Month Variable Cost
per Unit Sold
Advertising $ 370,000
Sales salaries and commissions $ 100,000 $ 14.00
Shipping expenses $ 5.00
The planning budget for March was based on producing and selling 19,000 units.
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