Katharine Johnson is the owner of Best Bikes, a company that produces high-quality cross-country bicycles. Best Bikes participates in a sup- ply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Best Bikes has purchased titanium from suppliers in the supply chain. Best Bikes uses titanium for the bicycle frames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Best Bikes hired Michael Bentfield, a recent graduate from State University, as purchasing manager. Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price. Best Bikes established the following standards based upon the company's experience with previous suppliers. The standards are as follows: $18 per pound 8 Ibs. Cost of titanium Titanium used per bicycle Actual results for the first month using the online supplier of titanium are as follows: Bicycles produced Titanium purchased Titanium used in production 400 5,200 lb. for $88,400 4,700 lb.
Katharine Johnson is the owner of Best Bikes, a company that produces high-quality cross-country bicycles. Best Bikes participates in a sup- ply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Best Bikes has purchased titanium from suppliers in the supply chain. Best Bikes uses titanium for the bicycle frames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Best Bikes hired Michael Bentfield, a recent graduate from State University, as purchasing manager. Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price. Best Bikes established the following standards based upon the company's experience with previous suppliers. The standards are as follows: $18 per pound 8 Ibs. Cost of titanium Titanium used per bicycle Actual results for the first month using the online supplier of titanium are as follows: Bicycles produced Titanium purchased Titanium used in production 400 5,200 lb. for $88,400 4,700 lb.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Q.Compute the direct materials price and efficiency variances.
Transcribed Image Text:Katharine Johnson is the owner
of Best Bikes, a company that produces high-quality cross-country bicycles. Best Bikes participates in a sup-
ply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Best
Bikes has purchased titanium from suppliers in the supply chain. Best Bikes uses titanium for the bicycle frames
because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier
this year, Best Bikes hired Michael Bentfield, a recent graduate from State University, as purchasing manager.
Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price.
Best Bikes established the following standards based upon the company's experience with previous
suppliers. The standards are as follows:
$18 per pound
8 Ibs.
Cost of titanium
Titanium used per bicycle
Actual results for the first month using the online supplier of titanium are as follows:
Bicycles produced
Titanium purchased
Titanium used in production
400
5,200 lb. for $88,400
4,700 lb.
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