Katharine Austen is the owner of Grand Bikes, a company that produces high quali
ID: 2508888 • Letter: K
Question
Katharine Austen is the owner of Grand Bikes, a company that produces high quality cross-country bicycles. Grand Bikes participates in a supply chain that consists of suppliers, manufacturers distributors, and elite bicycle shops. For several years Grand Bikes has purchased stanium from suppliers in the supply chain. Grand Bikes uses titanium for the bicyole frames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earier this year, Grand Bikes hired Michael LaChut, a recent graduate from State University, as purchasing manager. Michael believed that he oould reduce costs if he purchased titanium from an online marketplace at a lower price. HE (Click the loon to view the standard and actual information.) Read Requirement 1. Compute the direct materials price and efficiency variances Let's begin by caloulating the cost for the actual input at the budgeled price Actual input Budgoted priceCost 19 Direct materials (purchases) Direct materials (usage) Next determine the formula and caloulate the cost for the flexible budget 7,000 5,500 $133,000 19 104,500 Budgeted input for actual output 4,000 - Flexible budget cost -S 76,000 x Budgeted price 19 Direct materials Now compute the price and efficiency variances for direct materials. Label each variance as favorable (F) or unfavorable (U) Choose from any list or enter any number in the input fields and then click Check AnswerExplanation / Answer
Direct material Price variance =Actual cost - [AQ purchased *SR]
= 112000 - [7000*19]
= 112000 - 133000
= - 21000 F
Direct material efficiency variance = SR[AQUSed-SQ]
19[ 5500-4000]
19* 1500
28500 U
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