DiAngelo Products Uses a Standard Costing System to Assist in the Evaluation

question 73

Essay

DiAngelo Products uses a standard costing system to assist in the evaluation of operations. The company has had considerable employee difficulties in recent months, so much so that management has hired a new production supervisor (Joe Simms). Simms has been on the job for six months and has seemingly brought order to an otherwise chaotic situation.
The vice-president of manufacturing recently commented that "¼ Simms has really done the trick. Joe's team-building/morale-boosting exercises have truly brought things under control." The vice-president's comments were based on both a plant tour, where he observed a contented work force, and review of a performance report that showed a total labor variance of $14,000F. This variance is truly outstanding, given that it is less than 2% of the company's budgeted labor cost. Additional data follow.
• Total completed production amounted to 20,000 units.
• A review of the firm's standard cost records found that each completed unit requires 2.75 hours of labor at $14 per hour. DiAngelo's production actually required 42,000 labor hours at a total cost of $756,000.
Required:
A. As judged by the information contained in the performance report, should the vice-president be concerned about the company's labor variances? Why?
B. Calculate DiAngelo's direct-labor variances.
C. On the basis of your answers to requirement "B," should DiAngelo be concerned about its labor situation? Why?
D. Briefly analyze and explain the direct-labor variances.

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Definitions:

Give Up

The act of stopping an attempt or ceasing to engage in an activity or effort, often due to perceived difficulty or lack of success.

Emotional Awareness

The ability to recognize and understand one's own emotions and those of others.

Perceiving Emotions

The ability to recognize and understand emotions in oneself and others, typically considered a crucial part of emotional intelligence.

Monitor

A device used for displaying images and videos, often connected to a computer or television system.