What are some examples of variances?

What are some examples of variances?

While looking at budgeting this week, we encountered numerous forms of variances (the difference between a standard and the actual cost). We read how variances can be favorable (the company makes money) or unfavorable. Sometimes, a favorable variance leads to an unintended negative consequence (such as when a burger joint uses less meat in its patties, which causes dissatisfied customers who fail to return to the restaurant).

Now you come up with an example of variances. Think of a company that is manufacturing a product. What kind of materials are required? What is the standard for employee productivity? What are the alternatives for cheaper materials and labor? Provide enough information in your example so that your peers can answer the following questions:

What is the quantity standard and the price standard in your peer’s example?

What effect, if any, would you expect poor-quality materials to have on direct labor variances?

If variable manufacturing overhead is applied to production on the basis of direct labor-hours and the direct labor efficiency variance is unfavorable, will the variable overhead efficiency variance be favorable or unfavorable? Could it be either?

Answer needs to be a minimum of 300 words

Solution Preview

Introduction
The manufacturing process is made up of many steps. Variation may get introduced at any level from when the changes in the stages of execution occur such as the change in raw material at production. When it comes to equipment variation may happen when one uses many tools to accomplish the same task even if the devices were bought at the same time (Horngren,2002).

(366 words)