AKEI is an elite desk manufacturer. At the start of May 2008, the following budgeted unit amounts

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AKEI is an elite desk manufacturer. At the start of May 2008, the following budgeted unit amounts (based on a standard costing system) related to its manufacture of executive desks (made out of oak):

Direct materials: 16 square metres of oak per desk at €20 per square metre

Direct manufacturing labour: 3 hours per desk at €30 per direct manufacturing labour-hour

Budgeted production for May 2008 was 700 executive desks. There were no opening stocks of direct materials or finished goods on 1 May 2008. Work in progress is minimal. Actual results for May 2008 are as follows:

Direct materials purchased (12 640 square metres).............................€259120

Direct materials used (11 850 square metres) ............................................?

Direct manufacturing labour (2325 hours at €31 per hour) ............................?

Actual production in May 2008 is 750 executive desk units. The purchase price for oak wood remained unchanged throughout May 2008.

Required

1. Prepare a detailed flexible-budget variance analysis for May 2008 covering direct materials and direct manufacturing labour.

2. Give two explanations for each of the variances you calculate in requirement 1.

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Management and Cost Accounting

ISBN: 978-1405888202

4th edition

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

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