Reference no: EM131898634

I am planning to run a daycare

In responding to post below, discuss how your business and variance is similar to and different from their business and variance. Tie the concepts from their posts to examples from the text or other authoritative research sources.

Post :

For this example I'm going to use Fort George Brewing as my manufacturer. Fort George is a growing brewing company located in Astoria, OR. They currently produce and distribute a variety of craft beers in Oregon, Washington, and Idaho.

For this post I've chosen the direct labor efficiency variance, which measures the "difference between the actual quantity of input and the budgeted quantity of input allowed for that output level, multiplied by the budgeted input price" (Horngren, Datar, & Rajan).

For example, let's say that Fort George is brewing their seasonal Coffee Girl Stout and they use 1150 labor hours to complete the process. They produce 5,000 bottles of Coffee Girl Stout, their budgeted labor cost is $31 per hour, and they budgeted 0.3 labor hours per bottle.

To calculate the direct labor efficiency variance:

[1150 hours - (5,000 bottles x 0.3 hour/unit)] x $31 per hour

(1150 hours - 1500 hours) x $31 per hour

-350 x $31 per hour

$10,850 favorable direct labor efficiency variance.

Fort George used 350 less hours than budged to produce this year's Coffee Girl Stout. This budget variance may have resulted from:

The use of highly skilled labor

The acquisition of additional technology that improved efficiency

The use of a more efficient production schedule

Variances in the type or quality of ingredients used

Poor budget estimations