1.	Compute the direct materials price and efficiency variances.
2.	What factors can explain the variances identified in requirement 1? Could any other variances be affected?
3.	Was switching suppliers a good idea for GroovyGroovy Bikes? Explain why or why not.
4.	Should Michael LaChutLaChut's performance evaluation be based solely on pricevariances? Should the production manager's evaluation be based solely on efficiency variances? Why is it important for Katharine StanleyStanley to understand the causes of a variance before she evaluates performance?
5.	Other than performance evaluation, what reasons are there for calculatingvariances?
6.	What future problems could result from GroovyGroovy Bikes' decision to buy a lower quality of titanium from the online marketplace?

Katharine Stanley is the owner of Groovy Bikes, a company that produces high quality cross-country bicycles.Groovy Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Groovy Bikes has purchased titanium from suppliers in the supply chain.Groovy 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,Groovy Bikes hired Michael LaChut, 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.

Groovy Bikes established the following standards based upon thecompany's experience with their previous suppliers. The standards are as follows:

	Cost of titanium	$20	per pound
	Titanium used per bicycle	8	lbs.

Actual results for the first month using the online supplier of titanium are as follows:

	Bicycles produced	800
	Titanium purchased	8,400	lb. for $159,600
	Titanium used in production	6,900	lb