The luxury-goods manufacturer, Louis Vuitton, has several factories in the Unite
ID: 2589875 • Letter: T
Question
The luxury-goods manufacturer, Louis Vuitton, has several factories in the United States, France, and Spain that produce its bags and accessories. Part of the Louis Vuitton brand appeal to consumers is its exclusivity; its bags and accessories are not mass-marketed. Rather than growing the brand and losing the appeal of its exclusivity, Vuitton has been working to improve the efficiency of the manufacturing processes at its factories. Between the years of 2002 and 2012, Vuitton implemented the following changes at some of its locations:1
Reorganization: Workers were reorganized into teams of about 10 arranged in U-shaped clusters. This reorganization freed up 10% more floor space and allowed Vuitton to hire 300 new people without adding another factory.
Robots: Robots were installed at Vuitton’s shoe factory in Italy. Prior to the robot installation, workers walked back and forth from the shelves to their workstations. The robots now retrieve the foot molds around which a shoe is made, resulting in significant time savings.
Software: Software was developed to help leather cutters identify the flaws in the leather being used to manufacture bags. The software determines where to place the pattern pieces for the dozens of pieces of leather in a bag, drastically reducing the amount of leather waste.
1. Before the company makes any changes to its standards, it must consider the impact of the manufacturing process changes on its variances. Indicate the impact of the changed process on each variance as favorable, unfavorable, or unchanged/unknown.
Direct material price variance
Direct material quantity variance
Direct labor rate variance
Direct labor efficiency variance
Variable MOH rate variance
Variable MOH efficiency variance
Fixed overhead budget variance
Fixed overhead volume variance
Reorganization
Robots
Software
Direct material price variance
Direct material quantity variance
Direct labor rate variance
Direct labor efficiency variance
Variable MOH rate variance
Variable MOH efficiency variance
Fixed overhead budget variance
Fixed overhead volume variance
Reorganization
Robots
Software
Explanation / Answer
Changes Implemented Variance Reorganisation Robots Software Direct material price variance unchanged unchanged favourable Direct material quantity variance unchanged unchanged unchanged Direct labor rate variance unchanged unchanged unchanged Direct labor efficiency variance unchanged favourable favourable Variable MOH rate variance favourable unchanged unchanged Variable MOH efficiency variance unchanged unchanged unchanged Fixed overhead budget variance favourable unchanged unchanged Fixed overhead volume variance unchanged favourable unchanged
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