Variances Analysis: Corrective Action and Responsibility
As head plant manager, overseeing the entire production cycle, you have received a report from your accounting staff showing the results of your standard costing practices, shown below:
Materials Price Variance - 80,000 Favorable
Materials Quantity Variance - 60,000 Unfavorable
Labor Rate Variance - 75,000 Unfavorable
Labor Efficiency Variance - 90,000 Unfavorable
It is your job to bring these variances more in line so that the plant runs more efficiently and effectively. What are the first steps you take for corrective action, to whom do you address this variance problem, and why do you feel that they should be held responsible?
Your tutorial is 321 words and discusses what the variances might indicate, how they may be interrelated, and who you would ask about their potential causes. Several potential causes and questions are given to help you reason through the variance scenario.