Question
Farhan Ullah Aziz has been running an electronics manufacturing business for a long time. The company uses Direct Labor Hours as a cost driver for
Farhan Ullah Aziz has been running an electronics manufacturing business for a long time. The company uses Direct Labor Hours as a cost driver for applying overheads to different products. For the following INDEPENDEDNT situations, identify which variances would likely occur and would they be favorable (write F), unfavorable (write U) or there would be no effect on that variance (write NE). Assume that in every situation, everything else remains constant.
Direct Materials Price Variance F or UF or NE
Direct Materials Quantity Variance F or UF or NE
Labor Rate Variance F or UF or NE
Labor Efficiency Variance F or UF or NE
Variable Overhead Rate Variance F or UF or NE
Variable Overhead Efficiency Variance F or UF or NE
1. The government increased tax on import of critical components used in production.
2. Transportation company increased charges for delivering raw materials to the company.
3. The company hired a LUMS MBA who could not schedule production runs properly, resulting in loss of time and wastage of materials.
4. The company produced more than anticipated.
5. The standards company uses for variance analysis have not been adjusted for inflation for a few years.
6. Unfortunately, the company hired inefficient SDSB graduates in its accounting and finance department.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started