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Mile High Case Write Up

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Michelle Aviles

Mile High Case Write Up

April 15, 2015

2.  

2004 Flexible Budget with Flexible/Actual Variances

Cost Parts

Flexible Budget

Actual Cost

Total

Variance Efficiency

Price

Frame

Steel Tubing

3,564,000

3,572,100

-8,100

162,000

-170,100

Paint

27,000

28,188

-1,811

-500

-688

Labor

1,620,000

1,528,050

91,950

117,000

-25,050

Total

5,211,000

5,128,338

82,663

278,500

-195,838

Wheel

Parts

1,296,000

1,317,600

-21600

-21600

Rework Parts

25000

-25,000

-25,000

Labor

70,200

74,250

-4,050

-1,300

-2,750

Total

1,366,200

1,416,850

-50,650

-1,300

-49,350

Final

Parts

3,780,000

3,963,600

-183,600

-183,600

Rework Parts

45,000

-45,000

-45,000

Labor

113,400

116,000

-2,600

1,400

-4000

Total

3,893,400

4,124,600

-231,200

1,400

-232,600

3.

Cost Variances for Frame /Wheel/ Final Assembly & Overhead

FRAME

Total Variance

Price

Efficiency

Steel Tubing

-8,100

-170,100

162,000

Paint

-1,188

-688

-500

Labor

91,950

-25,050

117,000

Total

82,663

-195,838

278,500

WHEEL

Total Variance

Price

Efficiency

Parts

-21,600

-2,1600

0

Rework Parts

-25,000

-25,000

0

Labor

-4,050

-2,750

-1,300

Total

-50,650

-49,350

-1,300

1

Final

Total Variance

Price

Efficiency

Parts

-183,600

-183,600

0

Reworks Parts

-45,000

-45,000

0

Labor

-2,600

-4,000

1,400

Total

-231,200

-232,600

1,400

OVERHEAD

Total Variance

Spending Variance

OH Volume Variance

Total

4,000

60,000

56,000

4.         Bob Moyer should not be concerned about Mile High Cycles performance. The company increased their profit despite their actual cost being higher than what was budgeted. The total cost of production was budgeted for $10,895,000 and $11,969,787 was the actual cost which is 9.89% more. The company is moving in a positive direction. However, the variances that did occur were somewhat significant and should be addressed moving forward. The most significant variance was the final assembly cost. The labor variance was also high. The possible cause for this variance would be the difference between the actual cost of the materials and the amount on the flexible budget. Bob needs to focus on reducing the cost of materials and labor. First Bob should meet with suppliers to try and come to some agreement on a locked rate. He could also shop around to different suppliers to find a better or reduced rate. The final assembly efficiency variance should also be addressed. Final assembly has a higher variance rate compared to frame assembly and wheel assembly. Bob should meet with management about more training opportunities for current employees. He could also suggest hiring more skilled employees in the future if needed.

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