Question 1: O'Brien Vineyards has the following direct labor standard to bottle, cork and label one bottle of Pinot Noir;
What are O'Brien Vineyards labor efficiency variance and the labor rate variance?
Is the variances favorable or unfavorable?
What are 2 possible reasons for the variances?
Question 2: O'Brien Vineyards reports the following;
If O'Brien's Vineyard is compensated based on ROI, will he want to make an investment of $400,000 that would generate additional net operating income of $75,000 per year? Why or why not. Show calculations.
If O'Brien's vineyard is compensated based on residual income, will he want to make an investment of $400,000 that would generate additional net operating income of $75,000 per year? Why or why not. Show calculations.
Question 3. O'Brien Vineyards has the following direct materials standard to manufacture one bottle of Pinot Noir:
What is O'Brien Vineyards materials quantity variance and the materials price variance?
Is the variances favorable or unfavorable?
What are 2 possible reasons for the variances?