Baldwine company makes cabinet. One model, the delux ,has the following requirement .materials 40 feet of wood at birr 1.20per foot ,direct labour 4hours at birr 7 per hour ,variable overhead birr 5 per direct labour hour .during june 199×4, the company made 1200 deluxe cabinets. Operating results were as follows: material purchased [58,000feet at birr 1.15] birr 66700, material used 51200 feet ,direct labour [4750 hours at birr 7.10] birr 337255,variable overhead birr 23900.A. compute the material price variance?

Question

Baldwine company makes cabinet. One model, the delux ,has the following requirement .materials 40 feet of wood at birr 1.20per foot ,direct labour 4hours at birr 7 per hour ,variable overhead birr 5 per direct labour hour .during june 199×4, the company made 1200 deluxe cabinets. Operating results were as follows: material purchased [58,000feet at birr 1.15] birr 66700, material used 51200 feet ,direct labour [4750 hours at birr 7.10] birr 337255,variable overhead birr 23900.A. compute the material price variance?

Answer 1

To compute the material price variance, we need to compare the actual price paid per foot of wood with the standard price per foot of wood.

Here are the given figures:

Actual quantity of wood purchased = 58,000 feet
Actual price per foot of wood = Birr 1.15
Standard quantity of wood required = 40 feet
Standard price per foot of wood = Birr 1.20

To calculate the material price variance, we can use the following formula:

Material Price Variance = (Actual Price - Standard Price) × Actual Quantity

Let's calculate the material price variance:

Actual Price = Birr 1.15
Standard Price = Birr 1.20
Actual Quantity = 58,000 feet

Material Price Variance = (1.15 - 1.20) × 58,000
= (-0.05) × 58,000
= -2,900 Birr

The material price variance is -2,900 Birr.