Accounting: Variable and fixed Costs (Coursework Sample)

Title: Accounting
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Discussion 1
Materials price variance
Formula: materials price variance=AQ (AP-SP)
Where; AQ-Actual quantity, AP-Actual price, SP- Standard price
I.e. mpv= 10500(2.35-2.5)
= -$1,575
Where 2.35=28200/12000
Material Quantity Variance
Formula: Material quantity variance= SP (AQ-SQ)
Where;SP- Standard price, AQ-Actual quantity, SQ- Standard quantity
i.e. MQV= 2.5(10500-8400)
=5,250
Where 8400=2(2400+1800)
Labor rate variance
Formula: Labor rate variance =AH (AR-SR)
Where; AH-Actual hours, AR-Actual rate, SR-Standard rate
I.e. LRV= 1150(12-14)
=-2,300
Where 12=13800/1150
Labor Efficiency Variance
Labor efficiency variance =SR (AH-SH)
Where;SR-Standard rate, AH-Actual hours, SH-Standard hours
I.e. LEV=14(1150-900)
=3,500
I would not recommend Valley View hospital to having only a quarter of employees as senior technicians and the three quarters to be assistants. This is because with this policy the hospital may soon lose their patients/customers who will look for hospitals with senior technicians therefore which may eventually drive them out of business.
Variable overhead rate variance
Formula; Variable overhead rate variance=AH (AR-SR)
Where; AH-Actual hours, AH- Actual rate, SR-Standard Rate
I.e. VORV=1150(6.8-6)
=920
Where; 6.8=7820/1150
Variable overhead Efficiency Variance
Formula; Variable overhead efficiency variance= SR (AH-SH)
Where; SR-Standard rate, AH-Actual hours, SH-Standard Hours
I.e. VOEV=6(1150-900)
=1,500
There is a relation between the variable overhead efficiency variance and the labor efficiency variance. This is because they are both based on the direct labour hours what only varies is the average rate for the overheads.
Discussion 2
Scenario one
Managers will tend to increase the number of employees, who work at the developing stage,and they will have to pay the workers in this stage better wages and allowances which will in turn motivate the workers to work extra hard and also work overtime. Employees who are not efficient may also be laid off. If there are processes that are done manually, managers will also tend to automate these processes as the machines are faster than human labor. This in effect may not lead to overall performance since the cost of purchasing new machines and employing more labor force may escalate the benefit of the products spending less time in the development stage.
Scenario two
Increasing the number of percentage of public pay phones that are fully functional will increase customer satisfaction which means then that contribution margin per call will increase which is necessitated by the increase in sales. The turnover will generally increase as sales will be more than the operating assets. This means that then the return on invest will increase which may lead to increase in profits.
Scenario three
The manager in charge of production will definitely have to put all the necessary variables for this exercise ready. This means that he will have to purchase new vehicles that will be readily available for the transportation of orders as they are made. This comes with added costs of employing drivers and off loaders, maintenance of the vehicles and cost of fuelling. This will in turn will make the customers happy which mean they will come back for more orders.This generally will not lead to improvement of profits in the short term since the cost of purchase of vehicles and employment of employees is more than the benefit which may be in the long term.
Scenario four
In order to increase employees’ productivity it will be good to maintain a progressive positive attitude. This means that then employees should be awarded and recognized as per their performance. Promotions also should be done equally and according to the best policies by first starting to recruit from internally. Employees should also be encouraged to take leave and break from work by giving the leave allowanc...