7-3, 7-4, 7-7, 7-11

ASSIGNMENT MATERIAL Questions 7-1 What is the relationship between management by exception and variance analysis? 7-2 What are two possible sources of information a company might use to compute the budgeted amount in variance analysis? 7-3 Distinguish between a favorable variance and an unfavorable variance 7-4 What is the key difference between a static budget and a flexible budget? 7-5 Why might managers find a flexible-budget analysis more informative than a static-budget analysis? 7-6 Describe the steps in developing a flexible budget. 7-7 List four reasons for using standard costs. 7-8 How might a manager gain insight into the causes of a flexible-budget variance for direct materials? 7-9 List three causes of a favorable direct materials price variance. 7-10 Describe three reasons for an unfavorable direct manufacturing labor efficiency variance 7-11 7-12 Why might an analyst examining variances in the production area look beyond that business How does variance analysis help in continuous improvement? function for explanations of those variances? Comment on the following statement made by a plant manager: "Meetings with my plant accoun- tant are frustrating. All he wants to do is pin the blame on someone for the many variances he reports. 7-13 7-14 When inputs are substitutable, how can the direct materials efficiency variance be decomposed further to obtain useful information? 7-15 "Benchmarking against other companies enables a company to identify the lowest-cost pro- ducer. This amount should become the performance measure for next year." Do you agree