Purchase Solution

Possible causes for price and efficiency variances

Not what you're looking for?

Ask Custom Question

You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the Finance Department. This company is known for its rigorous case-based interview process. One of the students who successfully obtained a job with them upon graduation last year advised you to "know your variance cold" When you inquired further, she told you that she had been asked to pretend that she was investigating wage and materials variances. Per her advice, you have been studying the causes and consequences of variances. You are excited when you wak in and find that the first case deals with variance analysis. you are given the following data for May for the detergent bottling plant located in Mexico:

Actual
Bottles filled - 360,000
diret materials used in production - 6,000,000ozs
Actual direct material cost - 2,125,000 pesos
Actual direct manufacturing labor-hours - 22,040 hours
Actual direct labor cost - 664,940 pesos

Standards
Purchase price of direct materials - .35 pesos/oz
Bottle size - 15oz
Wage rate - 29.30 pesos/hour
Bottle per minute - .50

Please respond to the following questions as if you were in an interiew situation:

1) Calculate the materials efficiency and price variance, and the wage and labor efficiency variances for the month of May.

2) You are given the following context: "Union organizers are targeting our detergent bottling plant in Puebla, Mexico for a union. Can you provide a better explanation for the variances that you have calculated on the basis of this information?

Purchase this Solution
Solution Summary

In this solution, which is provided in an Excel document, calculations for materials efficiency and price variance, as well as wage and labor efficiency variances are given.

Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Operations Management

This quiz tests a student's knowledge about Operations Management

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Basics of corporate finance

These questions will test you on your knowledge of finance.

View More Free Quizzes
Related BrainMass Solutions

  • Compute variances for direct materials, labor, variable OH

    For direct labor, compute the rate and efficiency variances for the year. 3. For variable overhead, compute the rate and efficiency variances. 4. Was the president correct in his statement that "our costs are well under control"? Explain. 5.

  • Lindsey Manufacturing Company: Reasons for Variances...

    Causes of a large unfavorable variance may be from a shortage of materials causing a price spike (like an early frost killing all the orange crops and causing orange juice prices to spike).

  • Variance Analysis

    State possible causes of each variance that you have computed. For materials: The price variance is favorable and the quantity variance is unfavorable. The reason could be that lower quality material has been purchased.

  • Cost Accounting - Variance and Budgets

    For example, an employee in charge of purchasing can be held responsible for material price variances but they cannot be held responsible for material efficiency variances.

  • Over- or under-applied overhead variances

    What are some causes of variances? How should they be addressed? Who should be held responsible for these variances B) Price and efficiency variances. Peterson Foods manufactures pumpkin scones.

  • Comprehensive Variance Analysis

    The variable overhead spending and efficiency variances for the year.

  • Why investigate both price (rate) and volume (efficiency)?

    Why is it important to investigate both price (rate) and volume (efficiency) variances when rewarding employees for satisfactory work when performance evaluations are based on meeting budgets?

  • Variance Analysis: Miller Toy Company

    Direct labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.

  • Portland Company produces parts for medical devices.

    The two most significant variances are the direct material price variance and the direct labor efficiency variance.

View More Related Solutions