In 2019, only 806,840 Deliman meals were produced and sold to the retirement homes. Smith suspects that
Question:
In 2019, only 806,840 Deliman meals were produced and sold to the retirement homes. Smith suspects that retirement home controllers had systematically inflated their 2019 meal estimates.
Required
1. Recall that Deliman uses the master-budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Deliman's operating income in 2019?
2. Why might retirement home controllers deliberately overestimate their future meal counts?
3. What other evidence should Deli One's controller seek to investigate Smith's concerns?
4. Suggest two specific steps that Deli One's controller might take to reduce retirement home controllers' incentives to inflate their estimated meal counts.
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134453736
8th Canadian Edition
Authors: Srikant M. Datar, Madhav V. Rajan, Louis Beaubien