For each of the following brief scenarios, indicate whether the HIGHEST ranking supervisor (in the scenario)...

For each of the following brief scenarios, indicate whether the HIGHEST ranking supervisor (in the scenario) acted in an appropriate manner and give reasons as to why or why not.

1. The Vice-President of Manufacturing notices that the manager of the Assembly Department has had an unfavorable direct labor variance of $40 to $80 for each of the past six months. The budgeted amount for direct labor in the Assembly Department each month is $50,000. The VP of Manufacturing assigns an administrative assistant from the VP's office to spend a full month on the Assembly Department work floor to try and discover the underlying cause of the variance.

2.. A Vice-President of Manufacturing has recently fired the Department Supervisor for the Mixing Department for having a $15,000 unfavorable variance on the budget line item that deals with fixed factory overhead for the Mixing Department. The dismissed department supervisor attempted to explain that $12,667 of the $15,000 unfavorable variance was due to a recent property tax that went into effect on factory equipment used to mix environmentally sensitive materials, but to no avail.

3. For an annual budget review, the manager of a hospital's x-ray department went into the meeting feeling quite confident. All of the x-ray department's variances were favorable except for a minor unfavorable variance for materials that had been caused by a machine malfunction resulting in some ruined x-ray film. During the review, the manager's supervisor ignored the favorable variances and spent the entire time focusing on the unfavorable variance.

Solutions

Expert Solution

The budgeted amount of Direct Labour for each month is $50,000

Monthly unfavourable variance for each month ranges from $40 to $80 for last six months. This amounts to 0.08 to 0.16 percent of the budgeted amount. It is immaterial or insignificant amount.

Now the question arises. Is it worth to investigate?. No is the answer.

Some difference between budgeted and actual will always occur. These differences may be favourable or unfavourable and in addition to regular and controllable factors, random factors may also contribute for these differences. If every variance is to be investigated, management would waste a great amount of time and resources in tracking down reasons for irrelevant differences.

In the present case, size of the variance is very small. The action of Vice President, Manufacturing in deputing his office administrative assistant for a full month to investigate this very insignificant variance is inappropriate. It is waste of time and resources.

Instead, he should discuss with Assembly manager and find the ways from Assembly manager's perspective of turning these variances into favourable ones.

It is not mentioned the budgeted amount of fixed overheads in order to find out the variance is substantial or not.

Let us assume that variance of $15,000 is significant. If the property tax of $12,267 is the major contributor of this variance is true and is not estimated before in the fixed overhead budgets, the supervisor is not at fault. Moreover, property tax is a statutory obligation and is not in the control of Supervisor. The remaining amount of $2,333 may not be of that much significant. Also, it is not mentioned that the unfavourable variance is continuing.

In this backdrop, the best option for the Vice President is to look into actual picture, verify the claims of Supervisor and finding the reasons for variance. Dismissal of Supervisor may be inappropriate.

The behviour of the Manager's supervisor is inappropriate.

Discussing Unfavourable variance in the annual budget review is not wrong. But spending most of the time on unfavourable minor variance which is due to the genuine and identifiable factors and ignoring favourable variance is not appropriate.

Avoiding discussion on favourable variances will result into:

Decreased morale of the employees
Missing the chance of discussion for ways to further improve favourable variances.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

For each of the following brief scenarios, indicate whether the HIGHEST ranking supervisor (in the scenario)...

For each of the following brief scenarios, indicate whether the HIGHEST ranking supervisor (in the scenario) acted in an appropriate manner and give reasons as to why or why not. 1. The purchasing manager for a firm had been bragging in the factory break room about the great deal that he got for the firm on some paper for the printing department of the organization. In the meantime, the manager of the printing department was discovering that the quality of...

For each of the following scenarios indicate whether they are an example of Newton's First Law...

For each of the following scenarios indicate whether they are an example of Newton's First Law or Netwon's Second Law and justify your choice. 1. A car travels down a staright highway at a constant velocity. 2. A bus driver suddenly hits the brakes. Passengers who were standing continue to move to the front of the bus and fall over each other. 3. A driver increases speed to pass another on the highway. 4. A comet moving through space suddenly...

In each of the following scenarios, indicate whether the unemployment rate will increase or decrease. a....

In each of the following scenarios, indicate whether the unemployment rate will increase or decrease. a. The government increases income tax rates (Click to select) increase decrease uncertain b. The government repeals a law that made it difficult to fire workers (Click to select) increase decrease uncertain c. There is an increase in the percentage of workers who are unionized (Click to select) increase decrease uncertain d. The number of weeks workers are entitled to unemployment benefits falls (Click to...

In each of the following scenarios, indicate whether the unemployment rate will increase or decrease. a....

For this assignment, in each of the following five scenarios, indicate whether you consider the following...

For this assignment, in each of the following five scenarios, indicate whether you consider the following individual's behavior to be normal or abnormal. After deciding if the individual's behavior is normal or abnormal, defend your response by referencing the "4 D's" 1) A person drinks approximately three beers and three shots of liquor per day and sometimes has trouble remembering daily events in his life. 2) You see your neighbor trim his hedges with a pair of scissors and scrub...

1. For each of the following scenarios, graph the original and new equilibrium. Also, indicate whether...

1. For each of the following scenarios, graph the original and new equilibrium. Also, indicate whether the effect on the equilibrium price would be to increase it or decrease it. Likewise, indicate whether the equilibrium quantity would increase or decrease. Be sure to answer any additional questions that are included. a. The U.S. government finally stops making pennies (made mostly of copper) because consumers don’t want them and throw them in the trash. What would happen in the copper market?...

Advantages of outsourcing Indicate whether each scenario in the following table is an example of outsourcing....

Advantages of outsourcing Indicate whether each scenario in the following table is an example of outsourcing. Scenario Outsourcing Not Outsourcing A French pharmaceutical company closes its own accounts payable department and hires a Swiss accounting firm to take care of this aspect of its business. The Skype office in the United States contracts an independently operated call center in India to handle telephone customer service. Apple decides to internally manufacture displays for iPhone products rather than working with Japanese and...

Each of the given scenarios involves an externality. Classify each scenario based on whether or not...

Each of the given scenarios involves an externality. Classify each scenario based on whether or not it is likely that private bargaining could be used to achieve a socially optimal outcome in each case. Likely..... Unlikely...... Answer choices: 1. LeShawn's neighbor mows his lawn during the night 2. The production of steel results in pollution that affects millions of residents in the surrounding area 3. Opening an Apple store in the mall causes overall sales in the mall to increase...

Please respond to each of the following case scenarios. Your perspective is that of a Supervisor...

Please respond to each of the following case scenarios. Your perspective is that of a Supervisor or as an observer evaluating the supervisor’s decision in each of the scenarios, unless otherwise advised. Ensure that you identify the specific prohibited grounds, if you find that there is the basis for a Human Rights complaint. Also, make sure that you address the relevant issues in each case and provide an explanation, as needed. Limit your response for each scenario, to about 150...

For each of the five scenarios given below, indicate whether the change is physical or chemical...

For each of the five scenarios given below, indicate whether the change is physical or chemical in nature and explain the reasoning behind your answer. 1. A carbonated beverage container is opened, producing a fizzing sound and carbon dioxide bubbles. Type of Change: Explanation: 2. Dry ice (solid CO2) is taken from the freezer, placed into a container, and is held at room temperature. With time, the volume occupied by the block of dry ice decreases and there is a...

Subjects