MBAX 6050: Accounting for Management Decision Making
Week 5 Assignment: Accounting Tools and Measures for Decision Making- Part 2
For this Assignment, you will continue in your role as consultant to the Better Chair Company. Last week, you completed and submitted a report on types of costs and their implications for decision making. This week, the focus of your report will be the use of variance analysis in making effective managerial decisions.
In addition to the requirements that follow, be sure to incorporate references to appropriate academic sources, such as those found in this week’s Learning Resources or those in the Walden Library.
To prepare for this Assignment:
- Download Week 5 Part 1 Assignment Template.
- Download Week 5 Part 2 Assignment Template.
- Your instructor will provide the data to complete the calculations for this week’s Assignment. To access that information, refer to Doc Sharing .
Submit your completed business report and accompanying Excel file. Your report should be 3–4 pages in length (excluding title page and references) and should address the following:
Variance Analysis
The first area you have been asked to address for the management team in this report is to help them understand why the actual costs for the new chair are not aligned with the determined standard costs. The company has set up standard costs for labor and each component of the new chair. It now has the actual costs for the previous month’s production run. You are asked to determine which costs meet the standards and which are not, to analyze the probable cause of the variances, and to provide a recommendation for moving forward. To determine this, you will conduct a variance analysis. In Doc Sharing , your Instructor will provide you with standard and actual costs to use for this part of the Assignment.
To complete this part, address the following:
- Using the Week 5 Part 2 Assignment Template and the data provided by your Instructor in the Doc Sharing area, calculate the price variances (price variance and wage rate variance) and quantity variances (quantity variance and labor efficiency variance) for each material and direct labor.
- Note: In addition to submitting your work in Excel, include your calculations within your report by copying and pasting the information from Excel. For information on inserting data from Excel into Word, refer to the following:
- Microsoft. (n.d.). Insert a chart from an Excel spreadsheet into Word Links to an external site. . https://support.microsoft.com/en-us/office/insert-a-chart-from-an-excel-spreadsheet-into-word-0b4d40a5-3544-4dcd-b28f-ba82a9b9f1e1
- Analyze what the variances to the standards are, including an examination of possible causes.
- Propose at least two recommendations for potential remedies to address the variances.
- Summarize how understanding variance analysis can impact managerial decision making.
Week 5 Assignment: Accounting Tools and Measures for Decision Making—Part 2
Prepared by: Replace this text with your name.
Date: Replace this text with the submission date.
Walden University
MBAX 6050: Accounting for Management Decision Making
Variance Analysis
Replace this text with introductory information. Add or remove headings as necessary.
[Heading]
Insert your calculations of the price and quantity variances for each material as well as the rate and time variances for direct labor from Excel. Add or remove headings as necessary. For information on inserting data from Excel into Word, refer to the following: Microsoft. (n.d.). Insert a chart from an Excel spreadsheet into Word. https://support.microsoft.com/en-us/office/insert-a-chart-from-an-excel-spreadsheet-into-word-0b4d40a5-3544-4dcd-b28f-ba82a9b9f1e1
[Sub-Heading]
Replace or remove this text. Add or remove headings as necessary.
References
[Please delete this note before submitting your Assignment. For more information about formatting your reference list, please visit the following site: https://academicguides.waldenu.edu/writingcenter/apa/references .]
Include appropriately formatted references to support your Assignment. Refer to the Assignment guidelines for further information on the requirements.
Variance Analysis
Variance analysis helps managers determine if they are successful or not in meeting the goals set for them by upper management. It provides a way to determine possible causes and remedies for unfavorable variances as well as examining favorable variances in an effort to capture those processes in order to use them in the future. Through these resources, you will explore how a variance analysis is used and how to perform one.
- Franklin, M., Graybeal, P., & Cooper, D. (2019). Why it mattersLinks to an external site. . In Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/8-why-it-matters
- Franklin, M., Graybeal, P., & Cooper, D. (2019). 8.1 explain how and why a standard cost is developedLinks to an external site. . In Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/8-1-explain-how-and-why-a-standard-cost-is-developed
- Franklin, M., Graybeal, P., & Cooper, D. (2019). 8.2 compute and evaluate materials variancesLinks to an external site. . In Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/8-2-compute-and-evaluate-materials-variances
- Franklin, M., Graybeal, P., & Cooper, D. (2019). 8.3 compute and evaluate labor variancesLinks to an external site. . In Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/8-3-compute-and-evaluate-labor-variances
- Franklin, M., Graybeal, P., & Cooper, D. (2019). 8.5 describe how companies use variance analysisLinks to an external site. . In Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/8-5-describe-how-companies-use-variance-analysis
- Walden University, LLC. (2024). Standard costs, actual costs, and variances Download Standard costs, actual costs, and variances [PDF]. Walden University Canvas. https://waldenu.instructure.com
- Walden University, LLC. (2024). Variance practice and solution Download Variance practice and solution [PDF]. Walden University Canvas. https://waldenu.instructure.com
Related; BUSI 681 Proposed Project Model: Project File Assignment Instructions
Part 2 Variance Analysis
| Week 5 Variance Template | |||||
| a) Price variance = (actual price – standard price) times quantity bought | |||||
| Actual price | Standard price | Quantity bought | Price variance | Favorable or Unfavorable | |
| Plastic tubing | |||||
| Fabric | |||||
| Padding | |||||
| b) Wage rate variance = (Actual wage rate – standard wage rate) times actual hours | |||||
| Actual wage rate | Standard wage rate | Actual hours | Wage rate variance | Favorable or Unfavorable | |
| Direct labor | |||||
| c)Total price variance | 0 | 0 | 0 | 0 | |
| d) Quantity variance = | |||||
| (actual quantity used in production – standard quantity used in production) times the standard price | |||||
| Actual Quantity | Standard Quantity | Standard Price | Quantity variance | Favorable or Unfavorable | |
| Plastic tubing | |||||
| Fabric | |||||
| Padding | |||||
| e) Labor efficiency variance = (actual hours – standard hours) times standard wage | |||||
| Actual hours | Standard hours | Standard wage | Efficiency variance | Favorable or Unfavorable | |
| Direct labor | |||||
| f) Total quantity variance | 0 | ||||
| TOTAL VARIANCES | |||||
| Plastic tubing | – 0 | ||||
| Fabric | – 0 | ||||
| Padding | – 0 | ||||
| Direct labor | – 0 | ||||
| TOTAL | – 0 |
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