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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? 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.

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter8: Standard Costs And Variances
Section: Chapter Questions
Problem 7PA: Ellis Companys labor information for September is as follows: A. Compute the standard direct labor...
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  1. What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule?

  2. 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.
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. January February March April May June July August September October November December SCHIFFER CORPORATION Direct-Labor Variance Report Direct-Labor Rate Variance Standard Cost, % 0.16% 0.98% 0.02% 100 U 2,000 U 0.40% 3,800 F 3,900 F 4,200 F 5,100 F 4,800 F 0.76% 0.78% 0.84% 1.02% 0.96% 1.14% 0.84% 5,700 F 4,200 F 4,300 F 0.86% Amount $ 800 F 4,900 F Direct-Labor Efficiency Variance Standard Cost, % Amount $ 5,000 U 7,500 U 9,700 U 12,800 U 20,100 U 17,000 U 28,500 U 38,000 U 37,000 U 42,000 U 60,000 U 52,000 U 1.00% 1.50% 1.94% 2.56% 4.02% 3.40% 5.70% 7.60% 7.40% 8.40% 12.00% 10.40% Schiffer's controller uses the following rule of thumb: Investigate all variances equal to or greater than $30,000, which is 6 percent of standard cost.
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. January February March April May June July August September October November December SCHIFFER CORPORATION Direct-Labor Variance Report Direct-Labor Rate Variance Standard Cost, % 0.16% 0.98% 0.02% 100 U 2,000 U 0.40% 3,800 F 3,900 F 4,200 F 5,100 F 4,800 F 0.76% 0.78% 0.84% 1.02% 0.96% 1.14% 0.84% 5,700 F 4,200 F 4,300 F 0.86% Amount $ 800 F 4,900 F Direct-Labor Efficiency Variance Standard Cost, % Amount $ 5,000 U 7,500 U 9,700 U 12,800 U 20,100 U 17,000 U 28,500 U 38,000 U 37,000 U 42,000 U 60,000 U 52,000 U 1.00% 1.50% 1.94% 2.56% 4.02% 3.40% 5.70% 7.60% 7.40% 8.40% 12.00% 10.40% Schiffer's controller uses the following rule of thumb: Investigate all variances equal to or greater than $30,000, which is 6 percent of standard cost.
What characteristics of the variance pattern shown in the report should draw the controller's attention, regardless of the usual investigation rule? Note: Select "Yes" if the characteristics of the variance pattern draws the controller's attention, and "No" if it does not. The company's direct-labor efficiency variances exhibit a consistent unfavorable trend through the year. The company's direct-labor rate variances exhibit a favorable trend through most of the year. The unfavorable trend of the direct-labor efficiency is on the increase through most of the year. The favorable trend of the direct-labor rate is on the increase through the year. The unfavorable trend of the direct-labor efficiency is under control till July with regard to the limits of the investigation rule.
Transcribed Image Text:What characteristics of the variance pattern shown in the report should draw the controller's attention, regardless of the usual investigation rule? Note: Select "Yes" if the characteristics of the variance pattern draws the controller's attention, and "No" if it does not. The company's direct-labor efficiency variances exhibit a consistent unfavorable trend through the year. The company's direct-labor rate variances exhibit a favorable trend through most of the year. The unfavorable trend of the direct-labor efficiency is on the increase through most of the year. The favorable trend of the direct-labor rate is on the increase through the year. 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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