Questions
- 1. Describe the product being produced. Briefly outline the production process.
- 2. What direct materials are used to make the product? In general, what has happened to the cost of these materials over the past year? To find information about the price of materials, you might try one of these sources (or a combination of these sources):
- a. Go to the New York Times website (hyyp://nytimes.com/) or to USA Today (hppt://www.usatoday.com/) and search for each of the materials.
- b. Find the company’s annual report on its website and read its discussion about its cost of production.
- 3. Given what you have discovered about the cost of materials for this product, were the price variances for each material likely to be favorable or unfavorable (answer separately for each individual material)?
- 4. In general, what has probably occurred to the cost of direct labor for this company? Again, to find clues about its labor cost, you might try one of the options listed in Question 2. If you cannot find anything specific about this company, then discuss what has happened to the cost of labor in general over the past year.
- 5. Give what you have discovered about the cost of labor, was the labor rate variance likely to be favorable or unfavorable?
- 6. It is likely that the company has released information about its quality (efficiency) variances. In general, though, what could cause this company’s material quantity variances to be favorable? What could cause these material quantity variances to be unfavorable?
- 7. In general, what could cause this company’s variances to be favorable? What could cause these labor efficiency variances to be unfavorable?
