Ram Co. produces one product and it seems that the demand for that product is exceeding their manufacturing capacity. Below is the information concerning the machine that produces their product Actual run time this week 4,000 Minutes Machine time available per week 5,000 Minutes Actual run rate this week 2.5 Units per minute Ideal run rate 4 Units per minute Defect-free output this week 6,000 Units Total output this week (including defects) 10,000 Units Ram’s overall equipment effectiveness (OEE) was approximately: Multiple Choice a)0.625 b)0.35 c)0.60 d)0.30
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Ram Co. produces one product and it seems that the demand for that product is exceeding their manufacturing capacity. Below is the information concerning the machine that produces their product
| Actual run time this week | 4,000 | Minutes |
|---|---|---|
| Machine time available per week | 5,000 | Minutes |
| Actual run rate this week | 2.5 | Units per minute |
| Ideal run rate | 4 | Units per minute |
| Defect-free output this week | 6,000 | Units |
| Total output this week (including defects) | 10,000 | Units |
Ram’s overall equipment effectiveness (OEE) was approximately:
Multiple Choice
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