Patiala Sport Material Ltd manufactures

Section 1 of 1 MANAC ET Labour tale time 54,UUU A Total Labour Cost Variance 1,06,000 A The production director pointed out in his April board report that the new grade of labour required significant training in April and this meant that productive time was lower than usual. He accepted that the workers were a little slow at the moment but expected that an improvement would be seen in May. He also mentioned that the new wood being used was proving difficult to cut cleanly resulting in increased waste levels. Sales for April were down 10 per cent on budget and returns of faulty bats were up 20 per cent on the previous month. The sales director resigned after the board meeting stating that PSM had always produced quality products but the new strategy was bound to upset customers and damage the brand of the business. Required: a. Evaluate the cost reduction strategy of production director? Why did it end with adverse cost variances, explain? (5 Marks) In May the budgeted sales were 19,000 bats and the standard cost card is as follows: Materials (2kg at Rs50/kg) 100 Labour (3 hrs at RS 120/hr) 360 Marginal cost 460 Selling price 680 Contribution per unit 220 40,000kg of wood were bought at a cost of Rs 19,60,000, this produced 19,200 cricket meti . Rahul | Support & +1-650-9 Type here to search O HISection 1 of 1 MANAC ET that PSM had always produced quality products but the new strategy was bound to upset customers and damage the brand of the business. Required: a. Evaluate the cost reduction strategy of production director? Why did it end with adverse cost variances, explain? (5 Marks) In May the budgeted sales were 19,000 bats and the standard cost card is as follows: Materials (2kg at Rs50/kg) 100 Labour (3 hrs at RS 120/hr) 360 Marginal cost 460 Selling price 680 Contribution per unit 220 40,000kg of wood were bought at a cost of Rs 19,60,000, this produced 19,200 cricket bats, No inventory of raw materials is held. The labour was paid for 62,000 hours and the total cost was Rs 69,40,000. Labour effectively worked for 61500 hours. The sales price was reduced to protect the sales levels, However, only 18 000 cricket bats were sold at an average price of Rs 650. Required: a. Calculate the materials, labour and sales variances for May in as much detail as the information allows. Do these results support the claim of production director that things will improve in May? (15 marks) meill . Rahul | Support C +1-650 Type here to search O HImetti MANAC Section 1 of 1 MANACET ~ Question # 2 Revisit Case 2: Patiala Sport Materials (PSM) Lid manufactures cricket bats using high quality wood and skilled labour using mainly traditional manual techniques. The manufacturing department is a cost centre within the business and operates a standard costing system. At the beginning of April 2020, the production director attempted to reduce the cost of the bats by sourcing wood from a new supplier and replacing old workers by new workers at lower wage. The standards were not adjusted to reflect these changes. The variance report for April is shown below (extract): Material Cost: Material price Variance 51,000 F Material Usages Variance 75,000 A Total Material Cost Variance 24,000 A Labour Cost: Labour Rate Variance 4,36,000 F Labour Efficiency Variance 4,88,000 Labour idle time 54,000 DDD Total Labour Cost Variance 1,06,000 The production director pointed out in his April board report that the new grade of labour required significant training in April and this meant that productive time was lower than usual. He accepted that the workers were a little slow at the moment but expected that an improvement would be seen in May. He also mentioned that the new wood being used was proving difficult to cut cleanly resulting in increased waste levels. meet . Rahul | Support C +1-65 Type here to search O HI