Problem 11-13. Variance Analysis.
Will Norton, the general manager of Cummings Manufactured Siding, is reviewing a monthly variance summary. The summary reveals a large favorable material price variance and large unfavorable material quantity and labor efficiency variances. All other variances are small. Will’s initial instinct is to reward the purchasing manager with a substantial bonus and withhold the plant manager’s bonus until material quantity and labor efficiency variances improve.
a. Should Will act according to his instinct?
b. What scenario(s) other than good performance in purchasing and poor performance in manufacturing could lead to the same variances as those noted?
c. What should Will do to determine whether the purchasing manager’s performance is especially good and the plant manager’s performance is bad?