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Variance Analysis – Discuss the case advanced financial statement analytical methods such as variance analysis aid in decision analysis and in decision making?
A11-67. Analysis of Variations and Possible Causes North Carolina Go to YouTube.com and look for clips from Unwrapped on the Food Network or How It’s Made on the Discovery Channel. Watch a clip of a product that you find interesting. Companies are not likely to reveal everything about their production process and other trade secrets. When answering the following questions, you may need to make reasonable assumptions or guesses about the manufacturing process, materials, and workmanship. Now 07 Basic Discussion Questions
1. Describe the product being produced. Briefly describe the production process.
2. What direct materials are used to make this product? In general, what has happened reen: 07 to the cost of these materials during the last year? To find information about the price of materials, you can try one of these sources (or a combination of these sources): one. Go to the New York Times (
) or USA Today (
) website and search for each item. reen s 07.0. b. Find the company’s annual report on their website and read their discussion of their cost of production. reen sho
3. Given what you discovered about the cost of materials for this product, were the price variances for each material likely to be favorable or unfavorable (answer separately for each individual material)? a shot 072.58 p. m.
4. Overall, what has likely happened to direct labor cost for this company? Again, to find clues about their labor costs, you can try one of the options listed in question 2. If you can’t find anything specific about this company, discuss what happened to the cost of labor in general over the last year. red shot 07141 p. m.
5. Given what you found about labor cost, was the labor rate variance likely to be favorable or unfavorable? red shot
6. It is unlikely that the company has published information on its quantity variations (efficiency). However, in general, what could cause variations in the quantity of material for this company to be favorable? What could cause these variations in the amount of material to be 07.0.33 p. m. unfavorable? red shot
7. In general, what could cause this company’s labor efficiency variances to be favorable? What could cause these variations in labor efficiency to be unfavorable?