Week 5 Assignment

Spinal Contour is a manufacturer of high-quality products designed to help support healthy backs and spines. Their newest product offering is a massage chair. Below is the standard cost structure for the chair:

Standard Cost Sheet: Massage Chair

Metal tubing	5 meters @ $3.50	$17.50
Leather	3 square meters @ $5.00	$15.00
Padding	4 kilograms @$3.50	$14.00
Direct labor	3 hours @ $15	$45.00
Total standard cost		$91.50

This month, Spinal Contour manufactured 500 massage chairs. The following costs were incurred:

Actual Costs Incurred for the Month: Massage Chair

Metal tubing	2,600 meters	$9,360
Leather	1,400 square meters	$7,700
Padding	1,900 kilograms	$6,560
Direct Labor	1,400 hours	$21,140
Total cost		$44,850

Suppose you are the senior controller for Spinal Contour and you plan to perform a variance analysis of the massage chairs manufactured to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined.

The Assignment:

• Part 1: Calculate all materials and labor variances in a spreadsheet by using a program like Excel. Be sure to include price, quantity, wage rate, and labor efficiency variances.
• Part 2: Prepare a memo to your subordinate, using a program like Word.
  • Summarize and analyze the actual costs in relation to the standard costs incurred for the month.
  • Ask for clarification of any variances that need to be investigated.

Be sure to include whether alternatives exist for the future of the organization and explain how the results of the variance analysis might influence those alternatives.