Only need the answer to number 4
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 26BEA: Use the following information to complete Brief Exercises 10-25 and 10-26: Tico Inc. produces...
Related questions
Question
Only need the answer to number 4
Wildcat Pizza, Inc. produces batches of frozen pizzas to sell at a variety of grocery stores throughout the country.
Direct materials | $60.00 |
Direct labor | 40.00 |
Variable |
30.00 |
Total | $130.00 |
Wildcat produced and sold 100,000 batches for the year and encountered the following production variances:
Direct materials price variance | (300,000) | Favorable |
Direct materials quantity variance | 290,000 | Unfavorable |
Direct labor rate variance | (170,000) | Favorable |
Direct labor efficiency variance | (140,000) | Favorable |
Variable overhead spending variance | 150,000 | Unfavorable |
Variable overhead efficiency variance | (210,000) | Favorable |
Total variable production cost variance | (380,000) | Favorable |
Company policy is to investigate all unfavorable variances above 5 percent of the flexible budget amount for direct materials, direct labor, and variable overhead.
- Identify the variances that should be investigated according to company policy. Show calculations to support your answer.
- What recommendations would you make for the company’s current policy?
- Identify the highest favorable variance and highest unfavorable variance and provide one possible cause of each variance.
- Sarah Longmeadow, the owner of Wildcat Pizza, reviewed the company’s variance analysis report. The materials price variance of $(300,000) was the most significant favorable variance for the month, and the materials quantity variance of $290,000 was the most significant unfavorable variance. Sarah would like to reward the company’s purchasing agent for achieving such substantial savings by giving her a $2,000 bonus while not providing any bonus for the production manager.
- Do you agree with Sarah’s approach to awarding bonuses? Explain.
- What circumstances might lead to the conclusion that the purchasing agent should not receive a bonus?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,