Contemporary Tableware manufactures dishes and cutlery. The production supervisor has noted that the direct labor efficiency variance has decreased over the last three quarters as follows:    

● Quarter 1 $40,000 unfavorable

● Quarter 2 $34,000 unfavorable

● Quarter 3 $21,000 unfavorable

The supervisor is pleased that the variance has decreased but has asked for an analysis. In particular, the supervisor is interested if problems with direct materials or the machines contributed to the labor issues in terms of rework, which remains a problem to maintain the output quality. Upon further analysis, the following report is produced, summarizing the percentages per quarter of the variance attributed to various issues.        

The company changed suppliers in Quarter 3 because, despite penalty clauses for late deliveries and the poor quality of materials, the workers complained that the inferior and late materials resulted in rework, breakdown of machines, worker frustration, and even idle time for workers on the lines.

a. Could waiting until the next quarter to perform routine maintenance of equipment affect the direct labor efficiency variance? Which other equipment-related items affect the direct labor efficiency?

b. Should workers simply be fired because the direct labor efficiency variance remains about the same?

c. How could the amount of the training or the type of training impact the direct labor efficiency variance? Which other factors related to the workers could affect the direct labor efficiency?

d. Besides changing suppliers, what else can the company do to ensure the quality of the direct materials?

Transcribed Image Text:

Worker issues Equipment issues Poor materials Late materials 0 0.1 0.2 0.3 0.4 0.5 0.6 Quarter 1 Quarter 2 Quarter 3