Week 5 Assignment

You will utilize the information in this week’s Resources and your course text to consider how variance analysis and the results obtained from conducting such an analysis might impact decision making.

  • Part 1: Calculate all materials and labor variances in a spreadsheet by using a program like Excel. Be sure to include price, quantity, wage rate, and labor efficiency variances.
  • Part 2: Prepare a memo to your subordinate, using a program like Word.
    • Summarize and analyze the actual costs in relation to the standard costs incurred for the month.
    • Ask for clarification of any variances that need to be investigated.
    • Body Comfort Co. is a manufacturer of high-quality products designed to help support healthy backs and spines. Their newest product offering is a massage chair. Below is the standard cost structure for the chair:
      Standard Cost Sheet: Massage Chair

      Metal tubing 6 meters @ $3.00 $18.00
      Leather 2 square meters @ $7.00 $14.00
      Padding 3 kilograms @$3.90 $11.70
      Direct labor 4 hours @ $15 $60.00
      Total standard cost $103.70

      This month, Body Comfort Co. manufactured 500 massage chairs. The following costs were incurred:
      Actual Costs Incurred for the Month: Massage Chair

      Metal tubing 3,000 meters $9,455
      Leather 1,050 square meters $7,722
      Padding 1,600 kilograms $6,560
      Direct Labor 1,750 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 Body Comfort Co. 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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