Managerial Accounting: Creating Value in a Dynamic Business Environment
11th Edition
ISBN: 9781259569562
Author: Ronald W Hilton Proffesor Prof, David Platt
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 10, Problem 44P
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’s controller uses the following rule of thumb: Investigate all variances equal to or greater than $30,000, which is 6 percent of
Required:
- 1. Which variances would have been investigated during the year? (Indicate month and type of variance.)
- 2. What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule? Explain. Given these considerations, which variances would you have investigated? Why?
- 3. Is it important to follow up on favorable variances, such as those shown in the report? Why?
- 4. The controller believes that the firm’s direct-labor rate variance has a
normal probability distribution with a mean of zero and a standard deviation of $5,000. Prepare a statistical control chart, and plot the company’s direct-labor rate variances for each month. The critical value is one standard deviation. Which variances would have been investigated under this approach?
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Which variances would have been investigated during the year? (Indicate month and type of variance.)
The director of cost management for Odessa Company uses a statistical control chart to help management determine when to
investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances
during the first six months of the current year.
January
February
March
April
May
June
$ 300 F
850 U
750 U
950 U
1,100 U
1,480 U
The standard direct-labor cost during each of these months was $24,000. The controller has estimated that the firm's monthly direct-
labor variances have a standard deviation of $1,000.
Required:
2-a. Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 6
percent of standard cost.
2-b. Based on the cutoff value, which month will have its direct-labor efficiency variance investigated?
Complete this question by entering your answers in the tabs below.
Req 2A
Reg 2B
Determine the cutoff value for investigation if the…
[The following information applies to the questions displayed below.]
The director of cost management for Odessa Company uses a statistical control chart to help management determine
when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor
efficiency variances during the first six months of the current year.
January
February
March.
April
May
June
$ 250 F
800 U
700 U
908 U
1,050 U
1,200 U
The standard direct-labor cost during each of these months was $19,000. The controller has estimated that the firm's
monthly direct-labor variances have a standard deviation of $950.
Required:
1-a. Draw a statistical control chart and plot the variance data given above.
1-b. Which variances will be investigated?
Chapter 10 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 10 - Prob. 1RQCh. 10 - What is meant by the phrase management by...Ch. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - What is the interpretation of the direct-material...Ch. 10 - What manager is usually in the best position to...Ch. 10 - What is the interpretation of the direct-material...Ch. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - What is the interpretation of the direct-labor...Ch. 10 - What manager is generally in the best position to...Ch. 10 - What is the interpretation of the direct-labor...Ch. 10 - What manager is generally in the best position to...Ch. 10 - Prob. 16RQCh. 10 - Describe five factors that managers often consider...Ch. 10 - Discuss several ways in which standard-costing...Ch. 10 - Describe how standard costs are used for product...Ch. 10 - Prob. 20RQCh. 10 - Prob. 21RQCh. 10 - Saskatewan Can Company manufactures recyclable...Ch. 10 - Refer to the data in the preceding exercise. Use...Ch. 10 - Cayuga Hardwoods produces handcrafted jewelry...Ch. 10 - During June, Danby Companys material purchases...Ch. 10 - Refer to the data in the preceding exercise. Draw...Ch. 10 - The director of cost management for Odessa Company...Ch. 10 - Due to evaporation during production, Plano...Ch. 10 - Prob. 30ECh. 10 - Refer to the data in Exercise 1022, regarding...Ch. 10 - Saskatewan Can Company manufactures recyclable...Ch. 10 - New Jersey Valve Company manufactured 7,800 units...Ch. 10 - Prob. 34PCh. 10 - During May, Joliet Fabrics Corporation...Ch. 10 - Sal Amato operates a residential landscaping...Ch. 10 - Santa Rosa Industries uses a standard-costing...Ch. 10 - The following data pertain to Colgate-Palmolives...Ch. 10 - Orion Corporation has established the following...Ch. 10 - Associated Media Graphics (AMG) is a rapidly...Ch. 10 - The director of cost management for Portland...Ch. 10 - Ogwood Companys Johnstown Division is a small...Ch. 10 - Quincy Farms produces items made from local farm...Ch. 10 - Schiffer Corporation manufactures agricultural...Ch. 10 - Aqua float Corporation manufactures rafts for use...Ch. 10 - Rocky Mountain Camping Equipment, Inc. has...Ch. 10 - Springsteen Company manufactures guitars. The...Ch. 10 - Springsteen Company manufactures guitars. The...Ch. 10 - European Styles, Inc. manufactures womens blouses...Ch. 10 - MacGyver Corporation manufactures a product called...
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