Question
In this section of the exam,please avoid unnecessary detail. Be clear and specific in responding to questions or in identifying areas for further investigation: You
In this section of the exam,please avoid unnecessary detail. Be clear and specific in responding to questions or in identifying areas for further investigation:
You aretheSenior AnalystinthePlanning Department of a manufacturing firm, following is a variance report prepared at the end of a reporting cycle that has been submitted to you. It is your responsibility to do the necessary analysis and to prepare the report to be submitted to Senior Management:
Variance Analysis and Report
Period:
VariancesFUNet
DirectMaterials:-Price$275
- Quantity$156
DirectLabour- Rate923
-Efficiency3,720
Manufacturing Overhead:
Applied on the basis of Direct Labour
Overhead - Variable: -Spending355
-Efficiency802
Fixed:-Budget1,000
- Volume625
Totals:$1,275$6,581
Standards for the purchase and use of Direct Materials, Direct Labour, and Manufacturing Overhead are provided:
Thecompany used the following manufacturing standards/actual Per Unit:
*Direct MaterialStd: 2metres @$1.56 per metre
Purchased 2500m - used2,000m
*Direct Labour Std: 1.25Hours @ $16.00per hour
Worked 1420 Hrs
*MOH - Variable Std: 1.25Hours @ $3.45 per DLH
Applied on the basis of DLH's
-Fixed: 1.25 Hrs @$10.00 based on capacity to produce 1,000 units
Excerpts from the General Ledger follow:
ActualBudget/StandardOutput/Standard
DirectMaterials
Purchase$3,625$3,900
Use3,1202,964
DirectLabour23,64322,72019000
Manufacturing Overhead:VC
5,2544,8994097
FC
11,50012,50011,875
Required:
1. Before you can prepare the actual report, identify the items from the Variance Analysis & Report that you will wish to analyse. Do not make assumptions. For each one, state what additional information you will require, and why you wish more info..
2. Outline the steps you will take to investigate the items you identified in 1).above
3. List three(3) people(by job title), to whom you will wish to speak. What will you ask them? why?
1. What does Efficiency mean when referred to in Direct Labour Efficiency Variance, and Variable Overhead Efficiency Variance? Are they the same thing?
What are the implications of the Budget and the Volume Variance in Fixed Overhead? What is the potential danger in saving costs in Fixed Overhead?
2. Can you make any recommendations at this point, or would you need to do further analysis? Why?
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