A new factory manager was hired for a company that was experiencing slow production rates and lower productionvolumes than demanded by management. Upon investigation, the manager found that the workers were poorlymotivated and not closely supervised. Midway through the quarter, an incentive program was initiated, and cashbonuses were given when workers hit their production targets. Within a short time, production output increased, but thbonuses had to be charged to the direct labor budget. This could produce anA. unfavorable direct materials cost varianceB. unfavorable direct labor cost varianceOC. unfavorable direct materials efficiency varianceOD. unfavorable direct labor efficiency variance

C. unfavorable direct labor cost varianceExplanation:CORRECT OPTION:The situation described in the…

Answered: A new factory manager was hired for a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The manager of the Fleet division of Potlatch Automotive is evaluated on her division’s return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 8 percent. Consistent failure to achieve this minimum target is grounds for the dismissal of a division manager. The annual cash bonus paid to division managers is 1 percent of residual income in excess of $100,000. The Fleet division’s operating margin for the year was $9,336,000, during which time its average invested capital was $62,675,000. Required: a. Compute the Fleet division’s return on investment and residual income. b. Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be? c. In reporting her investment center’s performance for the past 10 years, the manager of the Fleet division accounted for the depreciation of her division’s assets by using an accelerated depreciation method allowed for tax purposes. As a…
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Terry Travers is the manufacturing supervisor of Aurora Manufacturing Company, which produces avariety of plastic products. Some of these products are standard items that are listed in the company’scatalog, while others are made to customer specifications. Each month, Travers receives a performancereport showing the budget for the month, the actual activity, and the variance between budget and actual.Part of Travers’s annual performance evaluation is based on his department’s performance against budget.Aurora’s purchasing manager, Sally Christensen, also receives monthly performance reports and she, too,is evaluated in part on the basis of these reports.The monthly reports for June had just been distributed when Travers met Christensen in the hallwayoutside their offices. Scowling, Travers began the conversation, “I see we have another set of monthlyperformance reports hand-delivered by that not very nice junior employee in the budget office. He seemedpleased to tell me that I’m in…
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Is Mr. Richardson correct in his conclusion that something is wrong with the company’s performance evaluation process?

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