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Hi
The world commodity prices for cotton increased by 20% in the month of November. At the beginning of the month, the hotel chain made an unexpected request for an immediate design change to the pillowcases. The new design required 10% more cotton than previously. It also resulted in production delays and therefore a shortfall in production of 10,000 pillowcases in total that month.
The production manager at Bedco is responsible for all buying and any production issues which occur, although they are not responsible for the setting of standard costs.
we have taken 10% increase in cotton in consideration but not the shortfall of 10k in production .In this question why dont we include this info in calculating the planned/operating variances
The shortfall in production of 10,000 pillowcases is indeed a significant event that would impact the calculation of variances. However, when calculating planned and operational variances, the focus is on the differences between standard and actual usage or costs, rather than the total output levels.
Therefore, while the shortfall in production is an important factor, it does not directly affect the calculation of material usage planning and operational variances, which are based on the quantity of materials used per unit produced, not the total number of units produced.
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we used the same amount of material but ended up with lower output , it affects labour effiency?
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