Hi thanks so much, I appreciate it!! Bucinett Applioatione Cace Statle veraus fa

Question

Hi thanks so much, I appreciate it!!

Bucinett Applioatione Cace Statle veraus faxble bat varlanees David Catrow is the manufacturing productsion supervisor for Faraday Motor Works (FMw. company tat manutactunes clactrical matons for industrial applications. Trying to sxplain why ha did not gut the year-and bonus that ha had axpected, a told his wito, This is the dumbest place Tve ever workad. Last yoar tha company set up this budgst asauming t would soll 150,000 units Wall, it sold anly 140,000. The company lost manay and gavie me a bonus for not using as much matorials and labor as was callod for in the budget. This year the company has the sama 50,000 units goal and tsals 160,000. Tha company's making allkinds o money. You a think Id gat this big fat bonus. Inatoad, managament tselis me I used mons mateias and labor than was budgoted. They sald he company would have mada a lot mora monay it rd stayod within my budgot. I guess I gotta wait for another bad year batone 1gat a bonua.Like I sald. this is the umbest place Iwe evar worknd. FMW's mastar budget and tha achual resuits tor the most econt yoar at operating activity tollow 150000 1 00010 000 3000000 5.50000 13 50000 F 00000 30000.000 200000 .0000 30000 05109,000 1843000 11400 AT4 000 F Required a. Did FMW Increaso unit salea by cutting pricos or by using soma other strabogy? b. Is Mc. Catrow comact in his conclusion that something is wrong with the companys perfomanco oluation procass? H sa, what do you suggost ba done to improva the aystam? o. Prepano a faxblo budgat and recompute the budgst varliances d. Explain what might have caused the xed costs to ba ditarent from the amount budgoood . Asaume that the company's materals price variance was favorabia and its matoras usago arance wan untavorabla. Explain why Mc Catrow may not be esponsibla for these vanlance Now, oxplain why he may have bean responsbla for the matorals sage varlance t. Assuma the labor prnice varance is untavorabie.Was the labor usaga vanance tavorabie or untavorabla? o is the fed cost volume vañance favorable o unfavorable? Explain the afect af this variance on the cost of ach unit producod

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.

a. FMW did not decrease prices as price for actual $22 is higher than budgeted $20. There may be other strategy or economic upturn because of which there is more sale. b. Evaluation process is not correct as when sale is low, bonus is given and when sale is hight no bonus. Since evaluation is being made on the basis of budget, evaluation should be done based on Flexible budget variance as done in point 3. c. 160000 Units at budgeted Price/cost Master Budget Actual Flexible: Budget value/150000*160000 Variance No of Units 150000 160000 160000 Sales Revenue 33000000 35520000 35200000 320000 Variable Manufacturing Costs: Material -4800000 -5300000 -5120000 -180000 Labor -4200000 -4400000 -4480000 80000 Overhead -2100000 -2290000 -2240000 -50000 Variable Selling,general and admin cost -5250000 -5450000 -5600000 150000 Contribution Margin 16650000 18080000 17760000 320000 Fixed Cost: Manufacturing overhead -7830000 -7751000 -7830000 79000 Selling,general and admin cost -6980000 -7015000 -6980000 -35000 Net Income 1840000 3314000 2950000 364000 d. Fixed costs are not expected to change with the volume change. Changes can be caused by: Increase or decrease in fixed cost element like: Rent Insurance Salaries etc e. He may not be responsible for variances as it may be caused by low quality material used in during production cuasing waste. However, waste may also be caused by negligence by workers on duty which is respoinsibility of Mr. Catrow f. if labor price variance is unfavorable, labor usage variance have to be FAVORABLE as overall labor variance is favorable. This is because of total variacen is composed of price and usage variance, offsetting each other in order to usage variance be favorable g. Fixed cost volume variance will be FAVORABLE if more units produced than budgeted. More units means lesser per unit fixed manufacturing overheads and increased profitability

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.