Manufacturing Company produces precision parts. LaCrosse uses a standard cost system, calculating variances for each department and reporting them to the department managers. Managers are supposed to use the information to improve their operations. Superiors use the same information to evaluate managers performance. Nuno Dahl was recently appointed manager of the assembly department of the company. He has complained that the system as designed is disadvantageous to his department. Included among the variances charged to the department is one for rejected units. The inspection occurs at the end of the assembly department. The inspectors attempt to identify the cause of the rejection so that the department where the error occurred can be charged with it. But not all errors can easily be identified with a department. The non-identified units are totalled and apportioned to the departments according to the number of identified errors. The variance for rejected units in each department is a combination of the errors caused by the department plus a portion of the unidentified causes of rejects. 

1. Is Dahl’s complaint valid? Explain the reason(s) for your answer. 

2. What would you recommend that the company do to solve its problem with Dahl and his complaint?