The cost of avocados is rising. For example, the price of a 20-pound box of avocados from the state of Avocado prices from Michoacán state in Mexico has jumped to $38 from $21, which is an 81% increase. The current price of avocados is the highest price on record in data that goes back to 1998.
Wholly Guacamole, a brand owned by MegaMex Foods, is made largely from avocados. Wholly Guacamole’s Classic Guacamole is made from more than 98% avocados.
See the following tutorial video on variance analysis and then answer the questions following the video. (You can also access the video at this link.)
Discussion Questions
- What would be the impact, if any, on the direct material price variance for Wholly Guacamole’s Classic Guacamole from the increase in the cost of avocados?
- What would be the impact, if any, on the direct material quantity variance for Wholly Guacamole’s Classic Guacamole from the increase in the cost of avocados?
- What would be the impact, if any, on the direct labor rate variance for Wholly Guacamole’s Classic Guacamole from the increase in the cost of avocados?
- What would be the impact, if any, on the direct labor efficiency variance for Wholly Guacamole’s Classic Guacamole from the increase in the cost of avocados?
- How might the managers of Wholly Guacamole deal with the increase in the cost of avocados?
Good afternoon, Thank you for your very useful postings and resources. I am an Accounting Instructor and would like to assign this assignment as extra credit for my students. Is there any way I could receive the answers to this?
Regards,
Silvina Barros, CPA, CFE Instructor| School of Global Business Miami Dade College | Kendall Campus 305-237-0341 | sbarros@mdc.edu
Hello. I do not provide any instructor materials for Accounting in the Headlines (unless there is a link in the blog post to request the instructor materials for a project.) For short blog posts, I do not prepare solutions for two reasons:
1. Most posts are designed to generate discussion and there may not be one right answer. I would not want to provide “one” right solution – that would discourage conversation.
2. I have no way to control who gets the solutions if I post them – I know some instructors use the blog posts as assignments – so I don’t want to provide answers where they are discoverable.