Purchase Solution

Variances Analysis: Corrective Action and Responsibility

Not what you're looking for?

Ask Custom Question

As head plant manager, overseeing the entire production cycle, you have received a report from your accounting staff showing the results of your standard costing practices, shown below:

Materials Price Variance - 80,000 Favorable

Materials Quantity Variance - 60,000 Unfavorable

Labor Rate Variance - 75,000 Unfavorable

Labor Efficiency Variance - 90,000 Unfavorable

It is your job to bring these variances more in line so that the plant runs more efficiently and effectively. What are the first steps you take for corrective action, to whom do you address this variance problem, and why do you feel that they should be held responsible?

Your tutorial is 321 words and discusses what the variances might indicate, how they may be interrelated, and who you would ask about their potential causes. Several potential causes and questions are given to help you reason through the variance scenario.

Purchase this Solution
Solution Summary

Your tutorial is 321 words and discusses what the variances might indicate, how they may be interrelated, and who you would ask about their potential causes. Several potential causes and questions are given to help you reason through the variance scenario.

Solution Preview

The first steps depend on where I think the problem resides. From looking at these variables, we notice a few things. Let's review them in order.
First, they are buying materials below standard prices (favorable material price variance) but using more than standard or wasting more than standard (unfavorable material quantity variance). Those two variances can be related (lower quality material with more defects causing more waste) or they may be unrelated.

Second, the labor ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

View More Free Quizzes
Related BrainMass Solutions

  • Communicating negative variances to management

    If no corrective action is taken, then the variances may get worse and cost more for the company to make corrective action. It is necessary to become a "whistle blower" when there are any negative significant variances occurred.

  • Proactive applications of cost measurement and corrections

    We then can take those causes and use a proactive approach of corrective action combined with cost measurement to reduce the chances for future variances.

  • Budgeting, Variance Analysis, and Performance Evaluations

    In addition to this, in-depth study of the variances helps the managers to reveal the causes for variances and take corrective action timely.

  • Discuss the ways to interpret financial statements by using

    The variances causes can then be investigated if the variance is unfavorable, to determine if corrective action is needed.

  • Responsibilities of CFO

    Budgeting is must to account for details of all logistics support and detail of entire working. This is also to take care of monitoring the progress, variances and corrective action.

  • Analysis of Health Care Budgets

    The budget can be managed through educating hospital management about budgeting and finance, offering incentives to stay within budgets, holding budget variance meetings with managers, and requesting corrective action plans from managers whose budgets

  • Budgetary Control

    This is called a variance analysis. Management can then determine why significant variances are present. Corrective action, if the variance is a detriment, can then be taken.

  • Monitor and control strategic plans

    Ø Analyzing Variances: The measurement of actual performance and its comparison with standard or budgeted performance leads to an analysis of variances.

  • Experiences with budget variances and corrective actions

    489102 Budget Variances In a store such as Walgreens Drug and Sundry, what experiences with budget variances and the outcome of the corrective actions are taken to stay within the budget? What type of corrective actions would have to be encountered?

View More Related Solutions