Katharine Johnson is the owner of Sporty Bikes, a company that produces high quality cross-country bicycles Sporty Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops For several years Sporty Bikes has purchased titanium from suppliers in the supply chain. Sporty 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 Sporty Bikes hired Michael Samson, 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. Actual input * Budgeted price Direct materials (purchases) Direct materials (usage) Cost X X er this chael i Data Table e icon uiren Sporty Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: at 1. y cald Cost of titanium Titanium used per bicycle $ 20 per pound 8 lbs rials rials Actual results for the first month using the online supplier of titanium are as follows: 400 Bicycles produced Titanium purchased Titanium used in production 6,200 lb for $105,400 4,700 lb Print Done Requirements Compute the direct materials price and efficiency variances. What factors can explain the variances identified in requirement 1? Could any other variances be affected? Was switching suppliers a good idea for Sporty Bikes? Explain why or why not Should Michael Samson'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 Johnson to understand the causes of a variance before she evaluates performance? Other than performance evaluation, what reasons are there for calculating variances? What future problems could result from Sporty Bikes' decision to buy a lower quality of titanium from the online marketplace? Print Done