Mile High Bicycles

Executive Summary

Bob Moyer founded Mile High Cycles, (MHC) a play along specializing in high-quality, handcrafted mountain bikes. During a time when sales for otherwise types of bikes were declining, nationwide demand for mountain bikes was growing. In 2004, MHC was able to forgather the additive demand for mountain bikes and had produced 800 more bicycles than originally plan; however, Bob wondered if be at MHC were being managed effectively. Due to the amplify in production in 2004, there are twain direct cost and overhead variances when evaluating real(a) costs against supple budgeted costs. Using a flexible budget is more straight in this instance as it captures the change in evaluate production from 10,000 to 10,800 bikes.
Variance Analysis Implications and possible Causes
Frame fabrication Department
There is a favorable cost variance in the frame assembly department of approximately $82,663 when comparing actual costs to flexible budgeted costs. Steel tubing has a thoroughgoing adverse variance of $8,100. The original budget for 2004, estimated the cost of vane tubing at $30.00 / lb. Actual costs were $31.50 / lb.



, which may allude unanticipated price increases (for example an increase in commodity prices since vane is a commodity), or higher costs for additional orders of trade name required to rival the increased production demand. Although steel price variance was unfavorable, we see a positive furbish up from efficiency variance, as only 3% more steel (113,400 vs. 100,000 lbs.) was required to produce 8% more output (10,800 vs. 10,000 bikes). paint has a total unfavorable variance of $1,187. Paint caused an unfavorable variance from both a price and efficiency standpoint. high costs due to smaller, additional orders of paint required to meet demand may have driven paint costs higher, while efficiency may have been negatively impacted by paint that was purchased and not used (assuming paint is purchased in large containers and used in a continuous...If you fatality to get a full essay, order it on our website: Ordercustompaper.com



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