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Chapter 23: Q5TI (page 1288)

Question:Match the product cost variance with the manager most probably responsible. Some answers may be used more than once. Some answers may not be used.

Variance Manager

19. Variable overhead cost variance

20. Direct materials efficiency variance

21. Direct labor cost variance

22. Fixed overhead cost variance

23. Direct materials cost variance

a. Human resources

b. Purchasing

c. Production

Short Answer

Expert verified

Answer

The matching is done as per the requirements of the question.

Step by step solution

01

Definition of direct Materials

Direct materials are defined as the raw material which is used in the manufacturing process of the company and gets converted into the finished product.

02

Matching

Variance

Managers

Variable overhead cost Variance

Production

Direct materials efficiency variance

Production

Direct Labor cost variance

Human Resources

Fixed Overhead Cost Variance

Production

Direct materials cost variance

Purchasing

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Most popular questions from this chapter

Drew Castello, general manager of Sunflower Manufacturing, was frustrated. He wanted the budgeted results, and his staff was not getting them to him fast enough. Drew decided to pay a visit to the accounting office, where Jeff Hollingsworth was supposed to be working on the reports. Jeff had recently been hired to update the accounting system and speed up the reporting process.

“What’s taking so long?” Drew asked. “When am I going to get the variance reports?” Jeff sighed and attempted to explain the problem. “Some of the variances appear to be way off. We either have a serious problem in production, or there is an error in the spreadsheet. I want to recheck the spreadsheet before I distribute the report.” Drew pulled up a chair, and the two men went through the spreadsheet together. The formulas in the spreadsheet were correct and showed a large unfavorable direct labor efficiency variance. It was time for Drew and Jeff to do some investigating.

After looking at the time records, Jeff pointed out that it was unusual that every employee in the production area recorded exactly eight hours each day in direct labor. Did they not take breaks? Was no one ever five minutes late getting back from lunch? What about clean­up time between jobs or at the end of the day?

Drew began to observe the production laborers and noticed several disturbing items. One employee was routinely late for work, but his time card always showed him clocked in on time. Another employee took 10­ to 15­minute breaks every hour, averaging about 1 hours each day, but still reported eight hours of direct labor each day. Yet another employee often took an extra 30 minutes for lunch, but his time card showed him clocked in on time. No one in the production area ever reported any “down time” when they were not working on a specific job, even though they all took breaks and completed other tasks such as doing clean­up and attending department meetings.

Requirements

1. How might the observed behaviors cause an unfavorable direct labor efficiency variance?

2. How might an employee’s time card show the employee on the job and working when the team member was not present?

3. Why would the employees’ activities be considered fraudulent?

Question:What is a flexible budget performance report?

Matching terms

Match each term to the correct definition.

Terms Definitions

a. Benchmarking

b. Efficiency variance

c. Cost variance

d. Standard

1. Measures whether the quantity of materials or laborused to make the actual number of outputs is within thestandard allowed for the number of outputs.

2. Uses standards based on best practice.

3. Measures how well the business keeps unit costs ofmaterials and labor inputs within standards.

4. A price, cost, or quantity that is expected under normalconditions.

Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren. Pilchuck Company manufactures tote bags and has provided the following information for September 2018:

Units

Actual Results

Static Budget

Static Budget

11,000

12,000

Sales Revenue

\(368,000

\)384,000

Variable Costs

183,000

198,000

Contribution Margin

185,000

186,000

Fixed Costs

76,000

77,184

Operating Income

\(109,000

\)108,816

  1. Requirements
  2. Prepare a flexible budget performance report, including the heading. Use the ABS function when calculating variances, and use the drop-down selections for F or U when describing the variances.
  3. Calculate the Static Budget Variance for operating income, and label it as a F (favorable) or U (unfavorable) variance.

Understanding variance relationships

Complete the table below for the missing variances.

Total Flexible Budget Product Cost Variance

(a)

Total direct material variance

(b)

Total direct labor variance

(c)

Total Manufacturing Overhead Variance

(d)

Direct material cost variance

Direct material efficiency variance

Direct Labor Cost Variance

Direct Labor Efficiency Variance

Total Variable Overhead Variance

Total fixed overhead variance

\(310F

\)165U

\(160U

\)415F

(e)

(f)

Variable Overhead Cost Variance

Variable Overhead Efficiency Variance

Fixed Overhead Cost Variance

\(525U

\)575F

$50F
See all solutions

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