While many organizational costs can be planned for, the actual results may vary from the initial projections. Assessing how these variances impact the bottom line is an essential task of many managers.

For this Assignment, review the information in the scenario posted in the entry titled Week 5 Assignment located in the Doc Sharing link. You will utilize the information in this weeks Resources and your course text to consider how variance analysis and the results obtained from conducting such an analysis might impact decision making. There is also an Excel template provided in the same entry in the Doc Sharing link that you may find helpful in completing this Assignment.

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.

Week 5 Assignment

ComfortRight, Inc. 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	Quantity	Price	Total
Metal tubing (meters)	6	$ 3.50	$21.00
Leather (square meters)	4	$ 5.00	$20.00
Padding (kilograms)	5	$ 3.50	$17.50
Direct labor (hours)	4	$ 15.00	$60.00
Total standard cost			$118.50

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

Actual Costs Incurred (500 chairs)	Quantity	Cost
Metal tubing (meters)	3,050	$11,285
Leather (square meters)	2,100	$10,920
Padding (kilograms)	2,550	$9,435
Direct labor (hours)	1,800	$27,360
Total cost		$59,000

Adapted from: Zimmerman, J. L. (2014). Accounting for decision making and control (8^th ed.). New York: NY: McGraw-Hill, Healing Touch, p. 565.

Suppose you are the senior controller for ComfortRight 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.