Account for Management Decision Making
Week 5 Assignment
Accounting Tools and Measures for Decision Making- Part 2
For this Assignment, you will continue in your role as consultant to the Better Chair Company. Last week, you completed and submitted a report on types of costs and their implications for decision making. This week, the focus of your report will be the use of variance analysis in making effective managerial decisions.
In addition to the requirements that follow, be sure to incorporate references to appropriate academic sources, such as those found in this week’s Learning Resources or those in the Walden Library.
To prepare for this Assignment:
- Download Week 5 Part 1 Assignment Template.
- Download Week 5 Part 2 Assignment Template.
- Your instructor will provide the data to complete the calculations for this week’s Assignment. To access that information, refer to Doc Sharing.
Submit your completed business report and accompanying Excel file. Your report should be 3–4 pages in length (excluding title page and references) and should address the following:
Variance Analysis
The first area you have been asked to address for the management team in this report is to help them understand why the actual costs for the new chair are not aligned with the determined standard costs. The company has set up standard costs for labor and each component of the new chair. It now has the actual costs for the previous month’s production run. You are asked to determine which costs meet the standards and which are not, to analyze the probable cause of the variances, and to provide a recommendation for moving forward. To determine this, you will conduct a variance analysis. In Doc Sharing, your Instructor will provide you with standard and actual costs to use for this part of the Assignment.
To complete this part, address the following:
- Using the Week 5 Part 2 Assignment Template and the data provided by your Instructor in the Doc Sharing area, calculate the price variances (price variance and wage rate variance) and quantity variances (quantity variance and labor efficiency variance) for each material and direct labor.
- Note: In addition to submitting your work in Excel, include your calculations within your report by copying and pasting the information from Excel. For information on inserting data from Excel into Word, refer to the following:
- Analyze what the variances to the standards are, including an examination of possible causes.
- Propose at least two recommendations for potential remedies to address the variances.
- Summarize how understanding variance analysis can impact managerial decision making.