Reference no: EM131918371
Assignment -
Shirt Company manufactures shirts for sale to retail stores. Mai, Shirt Co.'s controller, is becoming more frustrated with the company's standard costing system. Below are the standards and actual results for the most recent period:
Standard Actual
Shirts manufactured 6,000 6,732
Direct material costs $30,000 $30,294
Direct material yards 600 612
Direct labor costs $27,000 $27,693
Direct labor hours 1,500 1,530
There was no beginning or ending inventory of direct materials.
Standard costs are based on a study of the operations conducted by an independent consultant six months earlier. Mai observes that since that study she has rarely seen an unfavorable variance of any magnitude. She notes that even at current output levels, the workers seem to have a lot of time for long breaks and sitting around. Mai is concerned that the production manager, Ethan, is aware of this issue but does not want to tighten the standards. Variance analysis is part of the division and Ethan's performance evaluation.
Required: Complete each of the following questions. For problems: show your work, provide labels and descriptions of amounts, be organized in your work and clearly show your solution to the question.
For questions #3, #4 and #5 your answer should be a minimum of 50 words supported by course content information and details for full credit.
1. Calculate the direct materials price (rate) and efficiency (usage) variances for Shirt Company.
2. Calculate the direct labor price (rate) and efficiency (usage) variances for Shirt Company.
3. Discuss the implications of the variance analysis results on division performance and Ethan's performance evaluation as division manager.
4. If Mai does nothing about what she believes is lax standards discuss how this behavior may violate the Standards of Ethical Conduct for Management Accountants taken by Mai.
5. What action do you recommend Mai take? Explain and discuss.
Attachment:- Assignment File.rar