Question

PLEASE EXPLAIN IN YOUR OWN WORDS

Assigning responsibility. Melrose Furniture Company is organized into two divisions, Assembling and Finishing. The Assembling Division combines raw materials into a semi-finished product. The product then goes to the Finishing Division for painting, polishing, and packing. During May, the Assembling Division had significantly higher raw materials costs than expected because poor-quality raw materials required extensive rework. As a result of the rework, Assembly transferred fewer units than expected to the Finishing Division. The Finishing Division incurred higher labor costs per unit of finished product because workers had substantial idle time. The president of the company is upset about these events.

a. Whom should the firm hold responsible for the raw materials variance in the Assembling Division? Explain.
b. Whom should the firm hold responsible for the labor (idle time) variance in the Finishing Division? Explain.

Answer 1

(a).

As per information of the question it is clear that assembling division is responsible to combine raw materials into a semi-finished product hence this division can not make responsible for raw materials variance because this division only converts raw materials into semi-finished products. Proper supply of raw materials depends on the proper functioning of purchasing department hence that purchasing department will be responsible for this variance.

So for this type of variance purchasing depratment will be responsible.

(b).

It is clear that labor remains idle due to low supply of semi-finished products to finishing department hence finishing department will not be responsible for labor variance. For labor (idle time) variance president should make assembling division responsible because due to lower supply of semi-finished product. Although it is also true that assembling division also faced problem of poor quality raw materials but assembling division should work for making proper supply of semi-finished product to the finishing division.

Hence as a result we can say that assembling division is responsible for labor variance.