Discussion 1
While looking at budgeting this week, we encountered numerous forms of variances (the difference between a standard and the actual cost). We read how variances can be favorable (the company makes money) or unfavorable. Sometimes, a favorable variance leads to an unintended negative consequence (such as when a burger joint uses less meat in its patties, which causes dissatisfied customers who fail to return to the restaurant).
Now you come up with an example of variances. Think of a company that is manufacturing a product. What kind of materials are required? What is the standard for employee productivity? What are the alternatives for cheaper materials and labor? Provide enough information in your example so that your peers can answer the following questions:
What is the quantity standard and the price standard in your peer's example?
What effect, if any, would you expect poor-quality materials to have on direct labor variances?
If variable manufacturing overhead is applied to production on the basis of direct labor-hours and the direct labor efficiency variance is unfavorable, will the variable overhead efficiency variance be favorable or unfavorable? Could it be either?
Discussion 2
There are significant differences between large and small organizations - this week we read about the decentralization that is typically present in large organizations. We were introduced to the Balanced Scorecard, which is used to help managers make better decisions with more current data. The authors used the example of Hyatt Hotel chain, in which the employees at a specific site (Maui) are authorized to make the decision regarding a hotel guest's checkout time.
Let's discuss how this might play out...provide an example of how a late checkout would impact the organization's goals.
What are the relevant data that contribute to this decision? How does the Balanced Scorecard help with the decision-making process? What is the ROI for this decision?