Management Response to Volume Variance

question 21

Essay

Management response to volume variance
The SanBo Plant has an overall plant manager, four assistant plant managers and 30 department managers. One of the assistant plant managers made the following comments at a meeting of the department managers that report to him: 'These unfavourable production volume variances are killing our performance. When these variances are put on a per unit basis and added to our standard costs, the resulting product costs make us look like the worst plant in the company. If we don't get our unit costs down and look more efficient, we will be in deep trouble. The plant might be closed.
'This is what we should do. I want these departments to run at 100 per cent of normal output. If you don't have specific orders, make some of the components that are used for our most popular products. We can store the stuff; we will have to use it some time. Meanwhile that will boost our output, eliminate the unfavourable production volume variances and get our unit costs back down where they should be.'
Will the assistant plant manager's suggestion improve the plant's performance? Explain why or why not.

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Definitions:

Pretend Play

is a form of play where children use their imagination to create scenarios, often incorporating role-playing and objects as symbolic representations.

Egocentrism

The inability to differentiate between self and other, often observed in early childhood, leading to a perspective that is heavily centered on one's own perceptions and experiences.

Recollection

The process of remembering information or events from the past with conscious effort.

Artificialism

The belief that environmental features were made by people.