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Farhan Ullah Aziz has been running an electronics manufacturing business for a long time. The company uses Direct Labor Hours as a cost driver for applying overheads to different products.

For the following INDEPENDEDNT situations, identify which variances would likely occur and would they be favorable (write F), unfavorable (write U) or there would be no effect on that variance (write NE). Assume that in every situation, everything else remains constant.

Direct Materials Price Variance F or UF or NE

Direct Materials Quantity Variance F or UF or NE

Labor Rate Variance F or UF or NE

Labor Efficiency Variance F or UF or NE

Variable Overhead Rate Variance F or UF or NE

Variable Overhead Efficiency Variance F or UF or NE

1. Cheap, low cost maintenance tools are purchased resulting in workers having to re-work on several televisions, and wastage of direct materials and machine time.

2. Surprisingly, government reduced electricity prices

. 3. The workers union successfully negotiated increase in wages. This was not planned!

4. There was a sudden surge in dema nd. The company had to pay higher than normal wages to get the work done during overtime.

5. Graduates from a highly ranked business school were hired in production department who would steal electronic components from the factory.

6. The company hired graduate of SDSB as purchasing manager who could calculate EOQ properly, resulting in getting discounts from suppliers that the company had never enjoyed.

7. The company hired an SDSB graduate who outsourced factory building maintenance to a friend's company which charged higher than the previous contractor.

8. The company produced less than anticipated.

9. The standards company uses for variance analysis have not been adjusted for inflation for a few years.

10. The company increased marketing efforts in a bid to increase sales.

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