Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 15, Problem 15.29C
Case 15.29
LO 4. 5
Direct material variances-the price versus usage trade-off Williamson, Inc., manufactures quality replacement parts for the auto industry. The company uses a
Required:
- Give a probable explanation of why these results have occurred. (Hint: What might the purchasing manager be doing that is dysfunctional for the company as a whole?)
- How could the performance reporting system be improved to encourage more appropriate behavior on the part of the purchasing manager?
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Standard Costing, Ethical Behavior, Usefulness of Costing
Objective 1, 2, 3
Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The component's purchase price, $0.90, compared favorably with the standard price of $1.10. Given the quantity that would be purchased, Pat knew that the favorable price variance would help to offset an unfavorable variance for another component. By offsetting the unfavorable variance, his overall performance report would be impressive and good enough to help him qualify for the annual bonus. More importantly, a good performance rating this year would help him to secure a position at division headquarters at a significant salary increase.
Purchase of the part, however, presented Pat with a dilemma. Consistent with his past behavior, Pat made inquiries regarding the reliability of the new supplier and the part's quality. Reports were basically negative.…
Standard Costing, Ethical Behavior, Usefulness of Costing
Objective 1, 2, 3
Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The component's purchase price, $0.90, compared favorably with the standard price of $1.10. Given the quantity that would be purchased, Pat knew that the favorable price variance would help to offset an unfavorable variance for another component. By offsetting the unfavorable variance, his overall performance report would be impressive and good enough to help him qualify for the annual bonus. More importantly, a good performance rating this year would help him to secure a position at division headquarters at a significant salary increase.
Purchase of the part, however, presented Pat with a dilemma. Consistent with his past behavior, Pat made inquiries regarding the reliability of the new supplier and the part's quality. Reports were basically negative.…
QUESTION TWo
The Shatontola Co. Ltd is a single-product manufacturing company, which uses a marginal costing
system for internal management purposes. The year-end external reports are converted to absorption
costs. Variances are charged to the cost of goods sold.
The following data refers to the years ended 31 December 2020 and 2021:
2020
Sales price per unit
Standard marginal cost per unit:
Direct materials
Direct Labour
Marginal factory overheads
Marginal selling and administrative expenses
Fixed factory overheads
K
80
21
19
8
2
2021
K
90
23
22
10
3
180,000
Units
170,000
Units
Opening inventory
1,500
Closing inventory
2,000
Sales
20,000
The normal volume used for the purpose of absorption costing is 28,000s units in both years.
REQUIRED:
(a) Prepare profit and loss accounts for the year-ended 31 December 2021 on a marginal costing
and on an absorption costing basis.
(b) Discuss any differences which you may find between these two profit and loss acconts.
(c) State what advantages and…
Chapter 15 Solutions
Accounting: What the Numbers Mean
Ch. 15 - Prob. 15.1MECh. 15 - Prob. 15.2MECh. 15 - Prob. 15.3MECh. 15 - Prob. 15.4MECh. 15 - Mini-Exercise 15.5 LO 4, 5, 6 Variable overhead...Ch. 15 - Mini-Exercise 15.6
LO 4. 5, 6
Fixed overhead...Ch. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Prob. 15.9ECh. 15 - Prob. 15.10E
Ch. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Exercise 15.13 LO 4. 5 Direct material...Ch. 15 - Exercise 15.14 LO 4, 5 Direct material...Ch. 15 - Prob. 15.15ECh. 15 - Prob. 15.16ECh. 15 - Exercise 15.17 LO 9 Investment center analysis;...Ch. 15 - Prob. 15.18ECh. 15 - Problem 15.19 LO 4. 5 Calculate variable cost...Ch. 15 - Problem 15.20 LO 4. 5 Calculate variable cost...Ch. 15 - Problem 15.21 LO 4, 5 Direct labor...Ch. 15 - Problem 15.22 LO 4, 5 Direct labor...Ch. 15 - Problem 15.23 LO 5, 6 Fixed overhead...Ch. 15 - Case 15.25 LO 3 Performance reporting The chair of...Ch. 15 - Case 15.26 LO 3 Flexible budgeting One of the...Ch. 15 - Case 15.27 LO 4 Frequency of performance reporting...Ch. 15 - Case 15.28 LO 5 Rank the importance of eight...Ch. 15 - Case 15.29 LO 4. 5 Direct material variances-the...Ch. 15 - Case 15.30 LO 5 Evaluate the effects of erroneous...Ch. 15 - Prob. 15.31CCh. 15 - Case 15.32 The planning and control environment:...
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY