Introduction:
This Memo provides price and efficiency variances for Specialty Scientific’s manufactured product, the Magellan XS GPS device. Additionally, there is a brief overview of the company’s actions and suggestions for Specialty Scientific.
The table below pertains to the Magellan XS. Information about the calculations for these numbers is provided in attachments.
TABLE 1
Direct material/Direct Labor Navigation System Polarized Glass Plastic Casing Manufacturing Labor Hours
Direct Material Price Variance $0 $500 (F) $250 (F) $480 (U)
Direct Material Efficiency Variance $760 (F) $3,200 (F) $450 (F) $2,200 (F)
Analysis:
According to the table above, the standard costing system put in place is producing mostly favorable outcomes. Additionally, the amount of actual direct material and direct labor analyzed at the beginning of the year was higher than the budgeted amounts for this product. Therefore, Specialty Scientific is budgeting for less than they are actually producing.
Possible Actions By Employees: …show more content…
Employees may have felt pressure to produce less when the budget was being planned in order to have lower expectations. After the budget was set, employees could have then worked harder to produce more impressive totals. This leads to the company seeming as if it is exceeding expectations and look good to management and investors. Also, employees could have produced units at a slower rate at the beginning of the year in order to produce units at a normal production rate after the budget is produced. This would enable employees to produce more units than budgeted for and still have idle time. This behavior is not ethical because it does not align with the IMA Statement of Ethical Professional Practice; this behavior violates the credibility standard of delays or deficiencies in the timeliness and processing of the
This Memo provides price and efficiency variances for Specialty Scientific’s manufactured product, the Magellan XS GPS device. Additionally, there is a brief overview of the company’s actions and suggestions for Specialty Scientific.
The table below pertains to the Magellan XS. Information about the calculations for these numbers is provided in attachments.
TABLE 1
Direct material/Direct Labor Navigation System Polarized Glass Plastic Casing Manufacturing Labor Hours
Direct Material Price Variance $0 $500 (F) $250 (F) $480 (U)
Direct Material Efficiency Variance $760 (F) $3,200 (F) $450 (F) $2,200 (F)
Analysis:
According to the table above, the standard costing system put in place is producing mostly favorable outcomes. Additionally, the amount of actual direct material and direct labor analyzed at the beginning of the year was higher than the budgeted amounts for this product. Therefore, Specialty Scientific is budgeting for less than they are actually producing.
Possible Actions By Employees: …show more content…
Employees may have felt pressure to produce less when the budget was being planned in order to have lower expectations. After the budget was set, employees could have then worked harder to produce more impressive totals. This leads to the company seeming as if it is exceeding expectations and look good to management and investors. Also, employees could have produced units at a slower rate at the beginning of the year in order to produce units at a normal production rate after the budget is produced. This would enable employees to produce more units than budgeted for and still have idle time. This behavior is not ethical because it does not align with the IMA Statement of Ethical Professional Practice; this behavior violates the credibility standard of delays or deficiencies in the timeliness and processing of the