What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule? Which of the following is the best reason to also follow up on favorable variances? Bias in investigation targets and subsequent reports is reduced. Favorable variances occur more often as activity levels rise. Production efficiencies may be able to be replicated elsewhere in the organization.
What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule? Which of the following is the best reason to also follow up on favorable variances? Bias in investigation targets and subsequent reports is reduced. Favorable variances occur more often as activity levels rise. Production efficiencies may be able to be replicated elsewhere in the organization.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule?
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Which of the following is the best reason to also follow up on favorable variances?
- Bias in investigation targets and subsequent reports is reduced.
- Favorable variances occur more often as activity levels rise.
- Production efficiencies may be able to be replicated elsewhere in the organization.
Transcribed Image Text:Schiffer Corporation manufactures agricultural machinery. At a recent staff meeting, the following direct-labor variance report for the year just ended was presented by the controller.
**SCHIFFER CORPORATION
Direct-Labor Variance Report**
| | Direct-Labor Rate | Direct-Labor Efficiency |
|---------------------|-----------------------|--------------------------|
| **Variance** | **Standard Cost, %** | **Amount** | **Standard Cost, %** |
| **January** | $800 F | 0.16% | $5,000 U | 1.00% |
| **February** | 4,900 F | 0.98% | 7,500 U | 1.50% |
| **March** | 100 U | 0.02% | 9,700 U | 1.94% |
| **April** | 2,000 U | 0.40% | 12,800 U | 2.56% |
| **May** | 3,800 F | 0.76% | 20,100 U | 4.02% |
| **June** | 3,900 F | 0.78% | 17,000 U | 3.40% |
| **July** | 4,200 F | 0.84% | 28,500 U | 5.70% |
| **August** | 5,100 F | 1.02% | 38,000 U | 7.60% |
| **September** | 4,800 F | 0.96% | 37,000 U | 7.40% |
| **October** | 5,700 F | 1.14% | 42,000 U | 8.40% |
| **November** | 4,200 F | 0.84% | 60,000 U | 12.00% |
| **December** | 4,300 F | 0.86% | 52,000 U | 10.40% |
Note:
Transcribed Image Text:**Variance Pattern Analysis for Direct-Labor Reporting**
*What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule?*
**Instruction:** Select "Yes" if the characteristics of the variance pattern draws the controller’s attention, and "No" if it does not.
1. **The company's direct-labor efficiency variances exhibit a consistent unfavorable trend through the year.**
2. **The company's direct-labor rate variances exhibit a favorable trend through most of the year.**
3. **The unfavorable trend of the direct-labor efficiency is on the increase through most of the year.**
4. **The favorable trend of the direct-labor rate is on the increase through the year.**
5. **The unfavorable trend of the direct-labor efficiency is under control till July with regard to the limits of the investigation rule.**
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