Case Study

Vision Express (VX Co. hereafter) is a well-known and specialized company in manufacturing sunglasses. The VX Co. uses a standard costing system to set attainable standards for direct materials and direct labour. Direct material is made of two components: Frame and Lenses. The company also reviews and revises standards annually as necessary. Department managers, namely: the purchase manager, the production manager and the marketing manager, whose evaluations and bonuses are affected by the departments performance, are held responsible to explain variances as to whether they are favourable or unfavourable in their department performance reports .

Additional information:

Recently, the manufacturing variances have attracted the attention of the Chief Financial Officer (CFO) of VX Co. For no apparent reasons, some favourable/unfavourable variances have occurred. Assuming that you are the management accountant of VX Co., the CFO has required you to perform the following two tasks:

First, the CFO has asked you to compute the following variances on excel sheet:

* I want answers for ..

For level analysis:

- sales-volume Variance

For direct labor

- labor efficiency Variance

The following table summarizes the standards and actual results for the year of 2017: Sales Actual Results umber of units 7,800 7,300 Total Total Standard price Per unit Actual Price Per Price QXP) QxP) g price per t and the total $78 S608.400 S100 $730,000 Variable and Fixed manufacturing costs Actual Results StandardP TActual price it xP)input Actual Per Total quantity ef input quantity cunit(QxP) Direct materials- $4.6 S35,880 S24 S frames: per unit in total S2.3 9.6 $70,080 S3.1 lenses: per unit and in total $12.4 S96,720 S3 1.4 S18 $14.2 $19.88 $145,1 labour cost: per it and in total Variable manufacturing S35 $47.48 cost: per unit and in total S8 S62,400 S5.04 S36,792 margin: per unit in total Fixed $15,000 15,000 cost Net operating $47,400 $21,792