Price Variance Analysis Paper

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

11. Utilities and services standard output $150,000, actual output is $$218,000. This is a favorable variance of -$1777. This variance is due to reduce sales, less power at the plant is needed because less units are being made. 12. Research and Development standard output is $85,861, actual output is $82,841. This is a favorable variance of -$3,020. This variance is due to cut backs in R&D because of slow sales and low demand for new bikes. 13. Other General and Admin Expenses standard output $170,000, actual output is $172,000. This is an unfavorable variance of $2000. This increase is due to addition materials needed for advertising. 14. Other utilities and

14. A decision to work closely with a limited number of suppliers for the purpose of ensuring that the proper materials are available at the optimal time is an example of:

After closely reviewing the financial and production data, our accounting team has found that your traditional cost allocation is faulty and misleading. The costs of products A and C were over allocated and products B and D were under allocated causing deceptive information on the true profits of the company. Also, product B appears to be

Wilkerson employs a Normal Cost System, which means that they use predetermined overhead rates along with actual costs for direct material and direct labor. Normal costing systems are appropriate when overhead costs are a relatively small percentage of total manufacturing costs and product diversity is limited. For Wilkerson, normal costing does not make sense. Overhead costs make up over 50 percent of total manufacturing costs and their product offering is relatively more diverse. This indicates that the current accounting system in place may be distorting costs significantly. Supporting data:

Answer: Comparing the direct labor and overhead costs from 1988 and 1989 the actual savings were 270% (as detailed in Table 1)

Representing costs as a percentage of sales is not the best way to judge efficiency since it can ignore variables such as bottle deposits and discounted rates, which would show problems in production when in fact there are not any. Therefore, JJ’s statement on production remains truthful when he said that CBI has been operating as efficiently, if not more, in the past. Here’s an example:

Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.

The unit cost per bale appears to be falling which would agree with the General Manager’s alternative cost report. It’s hard to accurately compare the costs of producing each bale if total costs aren’t taken into account. Basing the overhead costs on a

• This cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged.

7. Though numbers given in the cost data can not be contested, I would definitely contest the way total cost has been computed. The item 345 department operates within a large manufacturing facility that churns out number of other products too. Hence judging the profitability of item 345 on the basis of total cost is not practical.

When considering requests such as a new piece of equipment, staff training, and supplies for the unit, a manager must consider the overall budget, constraints, and variances. If equipment has a useful life of more than one year and exceeds the minimum cost level of the facility, the manager may request the cost originates from the capital budget of the facility (Yoder-Wise, 2012). Large equipment such as a patient lift, which costs $3000 per lift, would be beneficial to the staff and

considers any price between full production cost and 150% of full production cost to be within its

a. Investigate the original calculation of Setup Cost (denoted by “S” in the case), is there

found out that despite this cost reduction in material cost, the costs of producing the low -end units for