StylPens labor variances are mostly unfavorable The direct manufacturing labor

Stylpens labor variances are mostly unfavorable the

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for their physical inventory. StylPen’s labor variances are mostly unfavorable. The direct manufacturing labor price variance is unfavorable for both basic and customized pens, meaning the wage rate paid for labor was more than was budgeted for. This could mean there was a lot of overtime or extra shifts, or even incorrect labor standards for their employees. The direct manufacturing labor efficiency variable was favorable for basic pens and unfavorable for customized pens. The unfavorable outcome could have arisen from workers taking longer to make pens, under skilled workers and/or not maintaining machines properly. The best way to combat this unfavorable variance is by ensuring the company is hiring properly skilled workers and cutting down on overtime shifts if necessary, which means there should be more time allocated to preparing the pens, so that overtime is not necessary. There were many other variances considered for this recommendation that were both favorable and unfavorable. As a reminder, a favorable outcome is not always necessarily a good thing. The most important part of a favorable or unfavorable outcome is that the company can use this information in the future to understand what areas of the business they can improve
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and what areas are performing well. Despite the disadvantages of budgeting, we believe the benefits outweigh the costs. StylPen, Inc. should continue to use budgeting to improve their operations and maintain better communication and coordination between different departments, managers, and employees. Thank you for your time,
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  • Spring '14
  • DavidR.Upton
  • Better, Direct material price variance, StylPen

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