Calculation of labour variances and actual material inputs working backwards from variances
A company manufactures two components in one of its factories. Material A is one of several materials used in the manufacture of both components.
The standard direct labour hours per unit of production and budgeted production quantities for a 13 week period were:
|
Standard |
Budgeted |
|
|
direct labour |
production |
|
|
hours |
quantities |
|
|
Component X |
0.40 hours |
36 000 units |
|
Component Y |
0.56 hours |
22 000 units |
The standard wage rate for all direct workers was £5.00 per hour. Throughout the 13-week period 53 direct workers were employed, working a standard 40-hour week.
The following actual information for the 13-week period is available:
Production:
Component X, 35 000 units
Component Y, 25 000 units
Direct wages paid, £138 500
Material A purchases, 47 000 kilos costing £85110
Material A price variance, £430 F
Material A usage (component X), 33 426 kilos
Material A usage variance (component X), £320.32 A
Required:
(a) Calculate the direct labour variances for the period;
(b) Calculate the standard purchase price for material A for the period and the standard usage of material A per unit of production of component X.
(c) Describe the steps, and information, required to establish the material purchase quantity budget for material A for a period.