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Katharine McKnight is the owner of Action Bikes, a company that produces high quality cross-country bicycles Action Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elte bicycle shops. For several years Action Bikes has purchased tanium from suppliers in the supply chain Action Bikes uses ttanium for the bicycle trames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Action Bikes hired Michael Alderman, a recent graduate from State University, as purchasing manager Michael beleved that he could reduce costs if he purchased titanium from an online marketplace at a lower price (Click the icon to view the standard and actual information) Read the requirements Requirement 1. Compute the direct materials price and efficiency variances Let's begin by calculating the cost for the actual input at the budgeted price Actual input W Budgeted price Dract materials (purchases) Drect materials (usage) Show Transcribed Text Data table Cost Cost of titanium Titanium used per bicycle ( Action Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Bicycles produced Titanium purchased Titanium used in production $20 per pound 8 lbs. Actual results for the first month using the online supplier of titanium are as follows: - 500 6,500 lb. for $117,000 5,000 lb. X

Katharine McKnight is the owner of Action Bikes, a company that produces high quality cross-country bicycles Action Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elte bicycle shops. For several years Action Bikes has purchased tanium from suppliers in the supply chain Action Bikes uses ttanium for the bicycle trames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Action Bikes hired Michael Alderman, a recent graduate from State University, as purchasing manager Michael beleved that he could reduce costs if he purchased titanium from an online marketplace at a lower price (Click the icon to view the standard and actual information) Read the requirements Requirement 1. Compute the direct materials price and efficiency variances Let's begin by calculating the cost for the actual input at the budgeted price Actual input W Budgeted price Dract materials (purchases) Drect materials (usage) Show Transcribed Text Data table Cost Cost of titanium Titanium used per bicycle ( Action Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Bicycles produced Titanium purchased Titanium used in production $20 per pound 8 lbs. Actual results for the first month using the online supplier of titanium are as follows: - 500 6,500 lb. for $117,000 5,000 lb. X

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 63P: Basuras Waste Disposal Company has a long-term contract with several large cities to collect garbage...
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Requirements 1. 2. 3. Was switching suppliers a good idea for Action Bikes? Explain why or why not. 4. Compute the direct materials price and efficiency variances. What factors can explain the variances identified in requirement 1? Could any other variances be affected? 5. Should Michael Alderman's performance evaluation be based solely on price variances? Should the production manager's evaluation be based solely on efficiency variances? Why is it important for Katharine McKnight to understand the causes of a variance before she evaluates performance? Other than performance evaluation, what reasons are there for calculating variances? 6. What future problems could result from Action Bikes' decision to buy a lower quality of titanium from the online marketplace? Print Done - X -
Transcribed Image Text:Requirements 1. 2. 3. Was switching suppliers a good idea for Action Bikes? Explain why or why not. 4. Compute the direct materials price and efficiency variances. What factors can explain the variances identified in requirement 1? Could any other variances be affected? 5. Should Michael Alderman's performance evaluation be based solely on price variances? Should the production manager's evaluation be based solely on efficiency variances? Why is it important for Katharine McKnight to understand the causes of a variance before she evaluates performance? Other than performance evaluation, what reasons are there for calculating variances? 6. What future problems could result from Action Bikes' decision to buy a lower quality of titanium from the online marketplace? Print Done - X -
Katharine McKnight is the owner of Action Bikes, a company that produces high quality cross-country bicycles Action Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elle bicycle shops. For several years Action Bikes has purchased tanium from suppliers in the supply chain Action Bikes uses stasium for the bicycle trames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Action Bikes hired Michael Alderman, a recent graduate from State University, as purchasing manager Michael beleved that he could reduce costs if he purchased titanium from an online marketplace at a lower price (Click the icon to view the standard and actual information) Read the requirements Requirement 1. Compute the direct materials price and efficiency variances Lef's begin by calculating the cost for the actual input at the budgeted price Actual input Budjeted price . Deact materials (purchases) Drect materials (usage) Show Transcribed Text Data table Cost Cost of titanium Titanium used per bicycle Action Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Actual results for the first month using the online supplier of titanium are as follows: Bicycles produced Titanium purchased Titanium used in production Print $20 per pound 8 lbs. 500 6,500 lb. for $117,000 5,000 lb. - Done X
Transcribed Image Text:Katharine McKnight is the owner of Action Bikes, a company that produces high quality cross-country bicycles Action Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elle bicycle shops. For several years Action Bikes has purchased tanium from suppliers in the supply chain Action Bikes uses stasium for the bicycle trames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Action Bikes hired Michael Alderman, a recent graduate from State University, as purchasing manager Michael beleved that he could reduce costs if he purchased titanium from an online marketplace at a lower price (Click the icon to view the standard and actual information) Read the requirements Requirement 1. Compute the direct materials price and efficiency variances Lef's begin by calculating the cost for the actual input at the budgeted price Actual input Budjeted price . Deact materials (purchases) Drect materials (usage) Show Transcribed Text Data table Cost Cost of titanium Titanium used per bicycle Action Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Actual results for the first month using the online supplier of titanium are as follows: Bicycles produced Titanium purchased Titanium used in production Print $20 per pound 8 lbs. 500 6,500 lb. for $117,000 5,000 lb. - Done X
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