Baldwin company make cabinets.one model,the Deluxe,has the followinh requirements.
Materials 40 feet of wood at birr 1.20 per foot
Direct labour 4 hours at birr 7 per hour
Variable overhead Birr5 per direct labour hour
During june 199x4, the company made 1,200 deluxe cabinates.operating results were as follows.
Materials purchased[58,000feet atbirr 1.15] birr 66,700
Materials used 51,200 feet
Direct labour[4,750 hours at birr 7.10] birr 33,725
Variable overhead birr 23,900
1,compute the standard variable cost per deluxe cabinate
2,compute the material price variancy.
To compute the standard variable cost per Deluxe cabinet, we need to consider the costs of materials, direct labor, and variable overhead.
1. Compute the standard variable cost per Deluxe cabinet:
a. Materials cost: The requirements are 40 feet of wood at birr 1.20 per foot. Therefore, the standard cost of materials per cabinet is 40 ft * birr 1.20/ft = birr 48.00.
b. Direct labor cost: The requirement is 4 hours at birr 7 per hour. Therefore, the standard cost of direct labor per cabinet is 4 hrs * birr 7/hr = birr 28.00.
c. Variable overhead cost: The requirement is birr 5 per direct labor hour. Since the direct labor requirement per cabinet is 4 hours, the standard variable overhead cost per cabinet is birr 5/hr * 4 hrs = birr 20.00.
Adding up these costs, the standard variable cost per Deluxe cabinet is birr 48.00 (materials) + birr 28.00 (direct labor) + birr 20.00 (variable overhead) = birr 96.00.
2. Compute the material price variance:
The formula for material price variance is:
Material Price Variance = (Actual Quantity Purchased * Actual Price) - (Standard Quantity * Standard Price)
a. Actual Quantity Purchased: 58,000 feet
b. Actual Price: birr 1.15 per foot
c. Standard Quantity: 1200 cabinets * 40 feet/cabinet = 48,000 feet
d. Standard Price: birr 1.20 per foot
Plugging in the values into the formula, we get:
Material Price Variance = (58,000 feet * birr 1.15/foot) - (48,000 feet * birr 1.20/foot)
Material Price Variance = birr 66,700 - birr 57,600
Material Price Variance = birr 9,100
Therefore, the material price variance is birr 9,100.