Response to the following problem:
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 hours production 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 Sh.500.00 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, Sh13,850,000
Material A purchases, 47 000 kilos costing Sh85 110
Material A price variance, Sh430 F
Material A usage (component X), 33 426 kilos
Material A usage variance (component X), Sh320.32 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.
Describe the steps, and information, required to establish the material purchase quantity budget for material A for a period.