**Scenario Analysis: Managing Budget Variance in Manufacturing***Introduction:*Suppose for a moment that you are a production manager in a manufacturing company and you just received a poor performance rating for not meeting your budget. If you were slightly over budget, identify at least two possible reasons for the budget variance. Please provide specific examples.*Discussion Points:*1. **Unexpected Material Costs:** - Example: A sudden increase in the price of raw materials due to supplier issues or market volatility can lead to higher production costs.2. **Production Delays:** - Example: Machinery breakdowns or workforce shortages that extend production timelines, increasing labor and operational expenditures.*Conclusion:*Understanding the root causes of budget variances is crucial for implementing corrective measures and improving future performance evaluations.

A budget variance is generally defined as the gap between the budgeted or predicted results and the…

Suppose for a moment that you are a production manager in a manufacturing company and you just received a poor performance rating for not meeting your budget. If you were slightly over budget, identify at least two possible reasons for the budget variance. Please provide specific examples.

Suppose for a moment that you are a production manager in a manufacturing company and you just received a poor performance rating for not meeting your budget. If you were slightly over budget, identify at least two possible reasons for the budget variance. Please provide specific examples.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Which ONE of the following is true? a. Assume all costs are fixed when creating a flexible budget b. None of the other available answers are true c. There can only be one cost driver d. Unfavorable activity variances for costs will typically accompany a favorable activity variance for revenue. e. Variances are classified according to the impact on revenue f. Assume all costs are variable when creating a flexible budget
Which one of the following would not explain an adverse direct labor efficiency variance? A. Poor scheduling of direct labor hours. B. Unusually lengthy machine breakdowns. C. Setting standard efficiency at a level that is too low. D. A reduction in direct labor training.
The differences between actual and budgeted figures are known as type your answer... 2 Which of the following is true about unfavorable variances? Managers generally investigate only unfavorable variances as part of "management by exception." Unfavorable variances will always be negative numbers when subtracting actual figures minus budgeted figures. O Unfavorable variances should always be interpreted as “bad news" for the company. Unfavorable variances are variances that cause operating income to be lower than budgeted.
Variance analysis is an extremely important tool in accounting, so unfavourable variances must be taken very seriously by accountants and managers”. How would you respond to this statement? Make use of examples in your explanation - 150 words please :)
Which of the following statements about fixed overhead variances is FALSE? An unfavorable volume variance means that a firm’s production facilities were under-utilized by producing less units of products than budgeted. Fixed overhead variances consist of a budget variance and a volume variance. The volume variance is a measure of facility utilization. The budget variance represents the difference between the original budgeted fixed overhead cost and the applied fixed overhead cost during a period.
Which of the following is a possible cause of an unfavorable material quantity variance? A) paying more than should have for workers B) purchasing too much material C) hiring higher-quality workers D) purchasing substandard material
Select all that were the source for the Indirect Costs favorable efficiency variance. a. Actual indirect costs per direct labor hour was less than budgeted indirect cost per direct labor hour. b. Actual indirect costs per direct labor hour was greater than budgeted indirect cost per direct labor hour. c. Actual number of jobs completed was less than budgeted number of jobs. d. Actual number of jobs completed was greater than budgeted number of jobs. e. Actual number of direct labor hours per job was less than budgeted direct labor hours per job. f. Actual number of direct labor hours per job was greater than budgeted direct labor hours par job. QUESTION 5 Select all that were the source for the Sales Activity favorable variance. a. Actual number of units completed was greater than budgeted number of units. b. Actual selling price per unit was less than budgeted. c. Actual number of units completed was less than budgeted number of units. d. Actual selling price per unit was greater than…
Which of the following statements is true? Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned. An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed. The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget.
[1] The purpose of identifying manufacturing variances and assigning their responsibility to a person/department should be to A. Trace the variances to finished goods so that the inventory can be properly valued at year-end. B. Determine the proper cost of the products produced so that selling prices can be adjusted accordingly. C. Use the knowledge about the variances to promote learning and continuous improvement in the manufacturing process D. Pinpoint fault for operating problems in the organization.
which of the following is a possible cause of an unfavorable labor efficiency variance? A. hiring substandard workers B. making to many units C. buying higher-quality material D. paying too much for workers
Although there are many reasons to this concern, one of the general reasons in gross profit variance analysis why an unfavorable sales volume variance occur is that * a. the company's product is not properly marketed. b. the finished product is over priced. c. the figures are not properly accounted for. d. the accounts are taking too long to collect. e. the raw materials used are overpriced.
Why is the identification of favorable and unfavorable variances so important to a company? How can the identification of the variances help management control costs? Please explain. Considering the flexible budgeting topic, it is important to look at this analysis as a significant contribution to the management of the company. Knowing what the bottom line profit or loss is important. But what is more important is to understand how your actual results varied in terms of units sold versus how the actual cost of each unit differed from the budget. What is a good example of this?