(SOLVED) Poitou Chemises SARL manufactures shirts for retail chains Armand Plessis the


Question Description:

$19

Poitou-Chemises SARL manufactures shirts for retail chains. Armand Plessis, the accountant, is becoming increasingly disenchanted with Poitou-Chemises’ six-month-old standard costing system. The budgeted amounts for both its direct materials and direct manufacturing labour are drawn from its standard costing system. The budgeted and actual amounts for July 2008 were
There were no opening or closing stocks of materials.
Armand observes that in the past six months he has rarely seen an unfavourable variance of any magnitude. The standard costing system is based on a study of the operations conducted by an independent consultant. He decides to play detective and makes some unobtrusive observations of the workforce at the plant. He notes that even at their current output levels, the workers seem to have a lot of time to discuss football, sitcoms and cooking recipes. At a recent industry conference on ‘Benchmarking and Competitiveness’, Françoise Daubigné, the accountant of Textiles-Georges-Grassens, told Armand that Textiles-Georges- Grassens had employed the same independent consultant to design a standard costing system. However, the company dismissed him after two weeks because Textiles-Georges- Grassens employees quickly became aware of the consultant observing their work.
At the industry conference, Armand participated in seminars on ‘benchmarking for the fabric industry’. A consultant for France-Solutions SA showed how she could develop sixmonth benchmark reports on the estimated costs of Poitou-Chemises’ major competitors. She indicated that she was already examining the estimated cost of shirts manufactured by the four largest importers into Europe. These importers had taken much business from Poitou-Chemises in recent years. This information would soon be available by subscribing to the France-Solutions monthly service.
Required
1. Calculate the price and efficiency variances of Poitou-Chemises for direct materials anddirect manufacturing labour in July 2008.
2. Describe the types of action the employees at Textiles-Georges-Grassens may have taken to reduce the accuracy of the standards set by the independent consultant. Why would employees take those actions? Is this behaviour ethical?
3. Describe how Poitou-Chemises might use information from France-Solutions when computing the variances in requirement 1.
4. Discuss the pros and cons of Poitou-Chemises using the France-Solutions information to increase its cost competitiveness.

Answer

$19