Question 1:
Evaluate the following statements concerning variance analysis. Be sure to provide specific examples to justify your evaluations.
a) When evaluating variances, it is best for managers and others to consider one variance at a time rather than groups of variances together.
b) "Favorable" variances represent good performance and "unfavorable" variances represent bad performance.
Question 2:
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Expected production (units)
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30,000
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Standard DML hours per unit
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7.00
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Standard DML rate per hour
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$25.00
|
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Standard pounds of DM usage per unit
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4.00
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Standard DM price per pound
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$15
|
|
|
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Actual
|
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Units produced
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32,000
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DML hours worked
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208,000
|
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Total cost of DML
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$5,512,000
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|
Pounds of DM purchased
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150,000
|
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Total cost of DM purchased
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$2,137,500
|
|
Pounds of DM used
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144,000
|
a) Calculate the following variances:
Direct manufacturing labor rate variance
Direct manufacturing labor usage variance
Direct materials price variance
Direct materials usage variance
b) Explain what each of the calculated variances implies about the firm's operations. Be specific!
Direct manufacturing labor rate variance
Direct manufacturing labor usage variance
Direct materials price variance
Direct materials usage variance