EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

2. a. The benefits that can be derived by both the company and its em-ployees from a properly implemented variance reporting system in-clude the following: • Variance analysis can provide standards and measures for incentive and performance evaluation programs. • Variance reporting can emphasize teamwork and interdepartmental dependence. • Timely reporting provides useful feedback, helps to identify problems, and aids in solving these problems. Responsibility can be assigned for the resolution of problems. b. Aurora Manufacturing Company could improve its variance reporting system, so as to increase employee motivation, by implementing the following: • Introduce a flexible budgeting system that relates actual expendi-tures to actual levels of production on a monthly basis. In addition, the budgeting process should be participative rather than imposed. • Only those costs that are controllable by managers should be in-cluded in the variance analysis. • Distribute reports on a timelier basis to allow quick resolution of Group Exercise 10-37 The answers to the questions in this group exercise will depend on the par-ticular auto repair company that is investigated. Group Exercise 10-38 ticular company that is investigated.