The Multi-period Cost Variance Investigation Decision
At its Ashdown factory, Fitzroy Paper Products has a large pulp steaming machine, which is worked for two 8-hour shifts each day. During the remaining 8 hours of the day, any defect which has developed during the 16-hour operating period can be corrected. The task of checking for a defect involves the dismantling of the machine’s heating mechanism; this work is done by the machine’s operatives, and costs £290 in overtime payments each time it is undertaken. In addition, further overtime payments of £140 are required if the checking procedure finds a defect which needs to be corrected; different defects require slightly different levels of expenditure to deal with them, but these differences are small enough to be ignored in practice.
Unable to display preview. Download preview PDF.