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Spine Line is a manufacturer of high-quality products designed to help support healthy spines. Their newest product offering is a massage chart. Below is the standard cost structure for the chair:
Standard Cost Sheet: Massage Chair
Metal tubing
6 meters @ $3
$18.00
Leather
2 square meters @ $7
$14.00
Padding
3 kilograms @$4
$12.00
Direct labor
4 hours @ $15
$60.00
Total standard cost
$104.00
This month, Spine Line manufactured 500 massage chairs. The following costs were incurred:
Actual Costs Incurred for the Month: Massage Chair
3,100 meters
$9,455
1,100 square meters
$7,722
1,600 kilograms
$6,560
Direct Labor
1,800 hours
$27,270
Total cost
$51,007
Adapted from: Zimmerman, J. L. (2014).Accounting for decision making and control (8th ed.). New York: NY: McGraw-Hill, "Healing Touch", p. 565.
Suppose you are the senior controller for Spine Line and you plan to perform a variance analysis of the massage chairs manufactured to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined.
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