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:
Describe the strengths and weaknesses of the three general types of budgeting processes. As part of your description, you should provide examples of the strengths and weaknesses.
Three types of budgeting processes are:
-Authoritative budgeting
-Participative budgeting
-Consultative budgeting
Question 3:
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Expected production (units)
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15,000
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Standard DML hours per unit
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7
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Standard DML rate per hour
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$26
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Standard pounds of DM usage per unit
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3
|
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Standard DM price per pound
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$14
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|
|
|
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Actual
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Units produced
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16,000
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Pounds of DM purchased
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53,000
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Total cost of DM purchased
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$689,000
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Pounds of DM used
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50,000
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DML hours worked
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106,000
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|
Total cost of DML
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$2,968,000
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a) Calculate the following variances:
Direct manufacturing labor rate variance
Direct manufacturing labor usage variance
Direct materials price variance (how we did it in the chat session)
Direct materials usage variance
b) Explain what each of the calculated variances imply 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