15. David Ltd manufactures components for lorry engines. Each unit has a standard material cost of 36, consisting of 3kg of material at a cost of 12 per kg. 48 minutes of direct labour time is allowed per unit and the standard wage rate is 9 per hour. The report below compares the planning budget, which had assumed annual output of 96,000 units in the three months to 30 June 20X9, with the actual results achieved. During the quarter, only 87,000 units were produced. Purchasing records show that 304,500 kg of materials were bought for 3,471,300. Payroll indicates that 551,145 was paid for 60,900 direct labour hours worked. Following the release of the results, Brian, the production manager said "I can see that our expenditure on direct material is a bit over budget, but we've saved lots on direct labour, so I think any investigation would be a waste of time and effort, especially as overall at 4,022,454 our total spend was comfortably under budget." Output (units) Budget Actual 96,000 units 87,000 units Direct materials Direct labour Total direct costs 3,456,000 3,471,300 691,200 551,145 4,147,200 4,022,445 Requirement: a) Consider how well costs have been controlled during the three months to 30 June 20X9. Your answer should include a calculation of all appropriate variances and a discussion of them. (18 marks) b) Comment also on Brian's statement, fully discussing any misconceptions which it implies. (7 marks) (Total 25 marks)