EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

5. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD 5. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
5. The variances have many possible causes. Some of the more likely causes include the following: Materials variances: Favorable price variance: Fortunate purchase, inferior quality materials, unusual discount due to quantity purchased, drop in market price, less costly method of freight, outdated or inaccurate standards. Unfavorable quantity variance: Carelessness, poorly adjusted machines, unskilled workers, inferior quality materials, outdated or inaccurate stan-dards. Labor variances: Unfavorable rate variance: Use of highly skilled workers, change in pay scale, overtime, outdated or inaccurate standards. Favorable efficiency variance: Use of highly skilled workers, high quality materials, new equipment, outdated or inaccurate standards. Variable overhead variances: Unfavorable spending variance: Increase in costs, waste, theft, spillage, purchases in uneconomical lots, outdated or inaccurate standards. Favorable efficiency variance: Same as for labor efficiency variance. Problem 10-19 (45 minutes)