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Prabanga Metal Works (PMW) manufactures garage roller-doors. The manufacture of a roller- door requires the following: Direct materials standard Direct labour standard 10 square
Prabanga Metal Works (PMW) manufactures garage roller-doors. The manufacture of a roller- door requires the following: Direct materials standard Direct labour standard 10 square meters of sheet metal at $5 per metre 5 hours at $10 During June PMW made 1,500 roller-doors. The purchasing manager through buying from a new supplier was able to purchase 16,000 square metres of sheet metal for $78,400. All 16,000 square metres were used in June's production. Direct labour totalled 7,600 hours for $79,800. Required a. Calculate the following variances for June and indicated whether they are favourable or unfavourable: i. Direct material price variance, ii. Direct material quantity variance, iii. Direct labour rate variance, iv. Direct labour efficiency variance, b. C. d. e. For each of the above four variances separately describe possible events that may have caused the variance. Comment on any possible interactions among the variances. In this instance, comment on who you believe should be held to account for the direct material quantity variance and the direct labour variances. Based on your above analysis of variances was the purchasing managers' decision to change suppliers a good decision. (6+4+3+4+3 = 20 marks) Total 100 marks
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