CP7-3 Variance interpretation You have been asked to investigate some cost problems in the Assembly Department of Ruthenium Electronics Co., a consumer electronics company. To begin your investigation, you have obtained the following budget performance report for the department for the last quarter Ruthenium Electronics Co. Assembly Department Quarterly Budget Performance Report Standard Quantity at Standard Rates $157,500 Actual Quantity at Standard Rates Quantity Variances s 70,000 U 87,500 U $157,500U Direct labor Direct materials $227,500 297,500 $455,000 385,000 $55000 $61200 $1 500 Total The following reports were also obtained Chapter 7 Performance Evaluation Using Variances from Standard Costs 321 Ruthenium Electronics Co. Purchasing Department Quarterly Budget Performance Report Actual Quantity at Standard Rates Actual Quantity at Actual Rates Price Variance Direct materials $437,500 5385,000 -552.500 F Ruthenium Electronics Co. Fabrication Department Quarterly Budget Performance Repert Actual Quantity at Standard Rates $203,000 Quantity Variances -$42,000 F Quantity at Standard Rates Direct labor Direct materials $245,000 140,000 $385,000 140,000 Total -$42,000F You also interviewed the Assembly Department supervisor. Excerpts from the interview follow Q: A: Listen, you've got to understand wbat it's been like in this department recently. Lately What explains the poor perforimance in your departmen? it seems no matter hose bard we ty, we can 't seem to make the standards. I'm no sure uhat is going on, but we've been baving a lot of problems lately Q: What kind of problems? A: Well, for instance, all this quarter we've been requisitioning purcbased parts from the material storeroom, and the parts just didn 1 fit togetber very well. During most of this quarter we've bad to scrap and sort purcbased parts-just to get our assemblies put together. Naturally, all this takes time and material. And that's not all. Q Go on. A: All this quarter, the work that we've been receiring from the Fabrication Department bas been sboddy. I mean, maybe around 20% of the muaterial that cornes in from Fabrication just camt be assembled. The fabrication is all wrong. As a result, we've bad to scrap and rework a lot of the stuff. Naturally, this bas just shot our quantity taria rices baud to srap and rwork a lot of the stut Naturaly. - -Interpret the variance reports in light of the comments by the Assembly Depart- ment supervisor