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Question - Budgeted sales of Z for January are 17,550 units. At the end of the production process for Z, 5% of production units are scrapped as defective. Opening inventories of Z for January are budgeted to be 13,700 units and closing inventories will be 12,300 units. Inventories of finished goods must not be defective.
Each unit of Z requires 4 litres of raw material A and 15% of A input into the process is lost through evaporation. The opening raw materials inventory of A is 12,000 litres but the company wants to reduce this by 20% during January. The cost of raw material A is £5/litre.
The direct labour is paid £12/hr and each unit of 2 requires 4.5 hours of labour. Due to machine breakdowns the labour is idle for 10% of the time.
Required -
(a) What is the cost of the purchases of raw material A during January?
(b) What is the direct labour cost during January?
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