QUESTION 6 Flexible Budget variances (7 marks)

Buyeos Barbeques manufactures portable barbeques. The controller of Buyeos is reviewing the year end variances and has asked for your preliminary advice on the following variances:

• Direct materials rate variance, $8,000 favourable
• Direct manufacturing labour efficiency variance, $6,000 unfavourable.

Required:

1. Provide the companys controller with an underlying reason why each of these variances may have occurred. (This is a qualitative analysis using diagnostic analysis) (3 marks) For example: for a price variance it is not sufficient to say the price of materials changed. Instead, give an example of what could have caused the change.

2. For each of the reasons you gave in part (a) identify who would most likely be responsible for explaining these variances and why they could be held responsible. (4 marks)