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C6. In this segment of our continuing case, assume that you have been using standard costing to...

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Accounting

C6. In this segment of our continuing case, assume that you havebeen using standard
costing to plan and control costs at your cookie store. In ameeting with your budget
team, which includes managers and employees from the Purchasing,Product Design,
and Production departments, you ask all team members to describeany operating problems
they encountered in the last quarter. You explain that you will usethis information
to analyze the causes of significant cost variances that occurredduring the quarter.
For each of the following situations, identify the direct materialsand/or direct labor
variance(s) that could be affected, and indicate whether thevariances are favorable or
unfavorable.
1. The production department uses highly skilled, highly paidworkers.
2. Machines were improperly adjusted.
3. Direct labor personnel worked more carefully than they had inthe past to manufacture
the product.
4. The Product Design Department replaced a direct material withone that was less
expensive and of lower quality.
5. The Purchasing Department bought higher-quality materials at ahigher price.
6. A major supplier used a less-expensive mode of transportation todeliver the raw
materials.
7. Work was halted for 2 hours because of a power failure.

Answer & Explanation Solved by verified expert
4.3 Ratings (524 Votes)

Variance(s) Favorable/Unfavorable
1 The production department uses highly skilled, highly paid workers. Labor rate variance Unfavorable
Labor efficiency variance Favorable
2 Machines were improperly adjusted. Materials quantity variance Unfavorable
Labor efficiency variance Unfavorable
3 Direct labor personnel worked more carefully than they had in the past to manufacture the product. Labor efficiency variance Unfavorable
4 The Product Design Department replaced a direct material with one that was less expensive and of lower quality. Materials price variance Favorable
Materials quantity variance Unfavorable
5 The Purchasing Department bought higher-quality materials at a higher price. Materials price variance Unfavorable
Materials quantity variance Favorable
6 A major supplier used a less-expensive mode of transportation to deliver the raw materials. Materials price variance Favorable
7 Work was halted for 2 hours because of a power failure. Labor efficiency variance Unfavorable

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