23 Aug While looking at budgeting this week, we
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 it’s your turn to 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?
Write at least 300 words
Post at least two replies to either peers or the instructor
Write at least 150 words per reply
INITIAL POST
Cite and summarize the resource.
FOLLOW UP POSTS
As you review what your peers have posted, use your critical thinking skills to respond to their interpretations and conclusions. Seek clarification for points of interest to you.
Michelle Thomas
My friend constructs and sells customized and personalized costume jewelry. She is the founder and CEO of her company, and her husband volunteers to assist her whenever she has large orders. She has no other volunteers or paid staff members. Nevertheless, she provides excellent customer service, guarantees to deliver the product on time, and provides a product replacement guarantee. Some of the tools she uses to shape her products includes wire cutters, pliers, crimp tools, clamps, and scissors. Some of the materials she uses to create her jewelry consists of acrylic beads, glass beads, different types of fabric, feathers, rhinestones, plastics, gold and silver plated materials and many other various materials. She purchases the materials she uses to make her jewelry from wholesalers, retailers, and craft stores. Because she purchases her materials in bulk, she has not identified any cheaper alternatives to the products she currently uses.
My friend provides excellent customer service by responding to each customers’ request within 24 hours, by offering products to customers at a reasonable price, and by delivering products to customers at an agreed upon deadline. For an illustration, I ordered a faux pearl necklace, earrings, and bracelet set for $20. Receipt of my order was acknowledged within 9 hours, and my product was hand delivered in 3 days as promised. About 6 months later, the stretchy part of my bracelet broke, and she repaired it at no cost. Conversely, if I had purchased these same pieces from Belk’s department store, it would have cost me about $35 with the option to return the product for a replacement within 90 days.
The reason my friend offers excellent customer service and reasonable prices, is to foster long-lasting, repeat customer relationships. In addition, because she stands behind her product replacement guarantee, she is committed to using quality materials. It would cost her precious labor hours as well as money, to constantly repair or replace jewelry made from poor quality materials.
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