Metalstar Company manufactures rivets from special alloys in a plant in Guadalajara. Its manufacturing costs in Mexican pesos for the first two months of 1998 were as follows:

Direct materials, direct labor, and utilities are considered to be variable costs; and
the other costs are fixed costs.

Required:
1. What was the budgeted average cost per rivet? Find the cost function.
2. What was the actual average cost per rivet for each month?
3. What is the budget variance for each expense for each month based on the
actual rivets produced? Comment on the variances.

Transcribed Image Text:

Monthly Actual Costs Budget January February Direct materials and direct labor .... M$100,000 M$ 91,000 M$108,000 Utilities for the factory 20,000 22,000 23,000 Depreciation of machinery and building 30,000 30,000 30,000 Supervision and other factory costs. Rivet output (units).... 60,000 60,500 62,000 200,000 180,000 210,000