Baker Company Adopted a Standard Cost System Several Years Ago

question 61

Essay

Baker Company adopted a standard cost system several years ago. The standard costs for the prime costs of its single product follow: $\begin{array}{ll}\text { Material: } 10 \mathrm{~kg} @ \$ 4.50 \text { per kilogram } & \$ 45.00 \\\text { Labour: } 6 \text { hours } @ \$ 8.50 \text { perhour } & \$ 51.00\end{array}$ The following operating data were taken from the records for December:
1.
Units completed:
5,800 units
2.
Budgeted output:
6,000 units
3.
Materials purchased:
60,000 kg
4.
Total actual labour costs:
$306,600
5.
Actual hours of labour:
36,500 hours
6.
Material usage variance:
$2,250 unfavourable
7.
Total material variance:
$450 unfavourable
Required:
Compute the following:
A. Labour rate variance
B. Labour efficiency variance
C. Actual kilograms of material used in the production process
D. Actual cost paid per kilogram of material

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Definitions:

Accounts Payable

Liabilities representing the amount a company owes to creditors for purchases made on credit.

Cash Inflow

Money entering a business, typically from operations, investments, or financing activities.

Cash Outflow

Refers to the payment of money in the form of cash or cash equivalents by a business for various purposes, including operating expenses, investment activities, and financing activities.

Direct Method

A way of presenting a cash flow statement where major classes of gross cash receipts and payments are disclosed, providing insight into the sources and uses of cash.