Question
Hot Wings a chicken wings company is in the process of reviewing budget variances for 2016. Cost variances are shown below and marked as favorable
Hot Wings a chicken wings company is in the process of reviewing budget variances for 2016. Cost variances are shown below and marked as favorable and unfavorable. Direct labor consists of workers, and manufacturing overhead is accounted for using direct labor hours. Based on the this data the Chief Financial Officer Mr. Merlin has asked for an explanation to the variances shown below. Based on the below below table what could be the reason:
A. Because the company upgraded to a new facility which resulted in higher rent and utility costs than originally budgeted for but the new facility has reduced the amount of time it takes workers to produce wings
B. The plant focused on lean manufacturing and increased efficiency of workers involved in chicken wing production and cut overall overhead costs
C. Demand for wings was lower than anticipated, so Hot Wings reduced excess capacity by performing layoffs
D. Hot Wings sales were stronger than expected, but due to unexpected levels of production caused overtime for workers. Company recued support staff to account for higher labor costs
E. The workers manager quit and the Hot Wings couldn't find a replacement. Without the manager to oversee workers, the workers were less efficient during there work period
Direct Materials | |
Sales volume Variance: | 115,000(unfavorable) |
Price Variance | 27,300 (favorable) |
Efficiency Variance | 62,500 (unfavorable) |
Direct Labor | |
Sales volume Variance: | 143,000 (unfavorable) |
Price Variance | 68,800 (unfavorable) |
Efficiency Variance | 29,100 (favorable) |
Manufacturing Overhead | |
Sales volume Variance: | 42,800 (unfavorable) |
Price Variance | 45,000 (unfavorable) |
Efficiency Variance | 22,500 (favorable) |
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