Boulette and Girls Inc. manufactures the famous cowboy boots that bear his name. The company...
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Finance
Boulette and Girls Inc. manufactures the famous cowboy boots that bear his name. The company uses a standard cost system. It established the standard cost per pair of boots as follows:
Raw material: 7 leather slats at $15 per latte
$105.00
Direct labour: 3 hours at $16 per hour
$48.00
Variable indirect manufacturing costs: 3 hours to $5
$15.00
Total
$168.00
Variable indirect manufacturing costs are charged on the basis of direct labour hours.
Boulette and Girls Inc. manufactured 8,500 units in the past year. It purchased 59,600 leather slats at a unit purchase cost of $14.50. The purchasing department normally buys the amount of raw materials required for production. Thus, there is no need to maintain stocks of raw materials. The direct labour was paid a total of 21,800 hours during the year at an average hourly rate of $16.80. Finally, the actual variable indirect manufacturing costs were $104,675 for the same period.
(2 points)
Calculate the difference in performance of variable indirect manufacturing costs and specify whether this difference is favourable or unfavourable.
Difference in performance of variable indirect manufacturing costs:
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