ESSAY. Write your answer in the space provided or on a separate sheet of paper 18) Stewart Corporation makes a product with the following standard costs: Standard Quantity or Standard Price or Standard Cost Per Unit $74.40 $7.60 Hours Direct materials Direct labor Variable overhead Rate 9.3 pounds $8.00 per pound $19.00 per hour $7.00 per hour 0.4 hours 0.4 hours $2.80 The company reported the following results concerning this product in August 3,000 units 3,100 units 30,370 pounds 33,900 pounds Originally budgeted output Actual output Raw materials used in production Purchases of raw materials Actual direct labor-hours Actual cost of raw materials purchases Actual direct labor cost Actual variable overhead cost 1,340 hours $264,420 $27,872 $8,844 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. d. Compute the labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance. Granger Stokes, managing partner of the venture capital firm Halston and Stokes, was dissatisfied with the top management of PrimeDrive, a manufacturer of computer disk drives. Halston and Stokes had invested $20 million in PrimeDrive, and thereturn on their investment had been unsatisfactory for several years. In a tense meeting of the board of directors of PrimeDrive, Strokes exercised his firm's rights as the major equity investor in PrimeDrive and fired PrimeDrive's chief executive officer (CEO). He then quickly moved to have the board of directors of PrimeDrive appoint himself as the new CEO. Stokes prided himself on his hard-driving management style. At the first management meeting, he asked two of the managers to stand and fired them on the spot, just to show everyone who was in control of the company. At the budget review meeting that followed, he ripped up the departmental budgets that had been submitted for his review and yelled at the managers for their "wimpy, do nothing targets." He then ordered everyone to submit new budget calling for tat lease a 40% increase in sales volume and announced that he would not accept excuses for results that fell below budget. Keri Kalani, an accountant working for the production manager at PrimeDrive, discovered toward the end of the year that her boss had not been scrapping defective disk drives that had been returned by customers. Instead, he had been shipping them in new cartons to other customers to avoid booking losses. Quality control had deteriorated during the year as a result of the push for increased volume, and returns of defective TRX drives were running as high as 15% of the new drives shipped. When she confronted her boss with her discovery, he told her to mind her own business. And then, to justify his actions, he said, "All of us managers are finding ways to hit Stokes's targets." Required 1. Is Granger Stokes using budgets as planning and control tool? 2. What are the behavioral consequences of the way budgets are being used at PrimeDrive? 3. What, if anything, do you think Keri Kalani should do? What you will do in this situation? Notes: 1. In the upper left corner of the page, indicate: name of the student, course, name of the assignment, due date, page number. The paper should be between 350 and 700 words. 2. Do not use a separate cover sheet, folder, or binder. 3. Staple all pages together
