Question
Case Study - Gates Video Games Complete Variance Analysis NOTE: You may utilize excel or word in this case. Show your work. Make you explanations
Case Study - Gates Video Games
Complete Variance Analysis
NOTE: You may utilize excel or word in this case. Show your work. Make you explanations descriptive.
Gates Video Games manufactures video game machines. Market saturation and technological innovations have caused pricing pressures that have resulted in declining profits. To stem the slide in profits until the company can introduce new products, top management has turned its attention to both manufacturing economies and increased production. To realize these objectives, management developed an incentive program to reward production managers who contribute to an increase in the number of units produced and achieve cost reductions. In addition, the company instituted a JIT purchasing program so that it purchases raw materials on an as-needed basis.
The production managers have responded to the pressure to improve manufacturing performance in several ways that have resulted in an increase over normal production levels. The video game machines put together by the assembly group require parts from both the printed circuit boards (PCB) and the reading heads (RH) departments. To attain increased production levels, the PCB and RH departments started rejecting parts from suppliers that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The maintenance staff is concerned that there will be serious breakdowns and unsafe operating conditions.
The more aggressive assembly group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH departments which, when coupled with demands for accelerated parts delivery by the assembly department, has led to more frequent parts rejections and increased friction among departments. Gates Video Games operates under a standard-costing system. The standard costs at a production level of 24,000 units per year are in part A ofExhibit8-13.
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