Katharine Hoffman 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 elite bicycle shops. For several years Action Bikes has purchased titanium from suppliers in the supply chain. Action 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, Action Bikes hired Michael Monachino, 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. (Click the icon to view the standard and actual information.) Read the requirements. Katharine Hoffman 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 elite bicycle shops. For several years Action Bikes has purchased titanium from suppliers in the supply chain. Action 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, Action Bikes hired Michael Monachino, 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. (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. X = Cost Direct materials (purchases) L Direct materials (usage) Actual input L Budgeted price S Katharine Hoffman 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, 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, Action Bikes hired Michael Monachino, a recen 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 X Budgeted price Direct materials (purchases) Direct materials (usage) = Cost distributors, and elite bicycle shops. For several years Action Bikes has purchased titanium from suppliers in the supply chain. Action hino, a recent graduate from State University, as purchasing manager. Michael believed that he could reduce costs if he purchased i Data Table Action Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Cost of titanium $17 per pound 8 lbs. 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 300 4,900 lb. for $78,400 3,400 lb. Print Done A Requirements 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 Action Bikes? Explain why or why not. 4. Should Michael Monachino'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 Hoffman to tand the causes of a variance before she evaluates performance? 5. 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 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 x Budgeted price = Cost Direct materials (purchases) Direct materials (usage) Katharine Hoffman 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 elite bicycle shops. For several years Action Bikes has purchased titanium from suppliers in the supply chain. Action 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, Action Bikes hired Michael Monachino, 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. (Click the icon to view the standard and actual information.) Read the requirements. Katharine Hoffman 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 elite bicycle shops. For several years Action Bikes has purchased titanium from suppliers in the supply chain. Action 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, Action Bikes hired Michael Monachino, 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. (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. X = Cost Direct materials (purchases) L Direct materials (usage) Actual input L Budgeted price S Katharine Hoffman 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, 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, Action Bikes hired Michael Monachino, a recen 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 X Budgeted price Direct materials (purchases) Direct materials (usage) = Cost distributors, and elite bicycle shops. For several years Action Bikes has purchased titanium from suppliers in the supply chain. Action hino, a recent graduate from State University, as purchasing manager. Michael believed that he could reduce costs if he purchased i Data Table Action Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Cost of titanium $17 per pound 8 lbs. 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 300 4,900 lb. for $78,400 3,400 lb. Print Done A Requirements 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 Action Bikes? Explain why or why not. 4. Should Michael Monachino'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 Hoffman to tand the causes of a variance before she evaluates performance? 5. 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 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 x Budgeted price = Cost Direct materials (purchases) Direct materials (usage)