Sugar and Spice Foods is famous for its cupcakes. One of the main ingredients of the cupcakes is sugar, which Sugar and Spice purchases by the pound. In addition, the production requires a certain amount of direct labor. Sugar and Spice uses a standard cost system, and at the end of the first quarter, there was a favorable direct labor efficiency variance. Which of the following is a logical explanation for that variance? A. The purchasing manager was able to secure a volume discount on dried fruit, purchasing the sugar for less than the amount set by standard. B. The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period. C. The cost of workers' medical insurance plans jumped up dramatically during the quarter. D. The production staff changed the work flow process so that production required fewer direct labor hours than the standards allowed.
Sugar and Spice Foods is famous for its cupcakes. One of the main ingredients of the cupcakes is sugar, which Sugar and Spice purchases by the pound. In addition, the production requires a certain amount of direct labor. Sugar and Spice uses a standard cost system, and at the end of the first quarter, there was a favorable direct labor efficiency variance. Which of the following is a logical explanation for that variance? A. The purchasing manager was able to secure a volume discount on dried fruit, purchasing the sugar for less than the amount set by standard. B. The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period. C. The cost of workers' medical insurance plans jumped up dramatically during the quarter. D. The production staff changed the work flow process so that production required fewer direct labor hours than the standards allowed.
Chapter1: Financial Statements And Business Decisions
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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.
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Sugar and Spice Foods is famous for its cupcakes. One of the main ingredients of the cupcakes is sugar, which Sugar and Spice purchases by the pound. In addition, the production requires a certain amount of direct labor. Sugar and Spice uses a standard cost system, and at the end of the first quarter, there was a favorable direct labor efficiency variance. Which of the following is a logical explanation for that variance?
The purchasing manager was able to secure a volume discount on dried fruit, purchasing the sugar for less than the amount set by standard.
The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period.
The cost of workers' medical insurance plans jumped up dramatically during the quarter.
The production staff changed the work flow process so that production required fewer direct labor hours than the standards allowed.
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