Katharine Johnson

Johnson is the owner of Best

Best Bikes, a company that produces high qualitycross-country bicycles. Best

Best Bikes participates in a supply chain that consists ofsuppliers, manufacturers,distributors, and elite bicycle shops. For several years Best

Best Bikes has purchased titanium from suppliers in the supply chain. Best

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 thisyear, Best

Best Bikes hired Michael Bentfield

Bentfield, a recent graduate from StateUniversity, as purchasing manager. Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price.

Katharine Johnson is the owner of Best Bikes, a company that produces high quality cross-country bicycles. Best Bikes participates in a supply 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 Benteld, 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. a (Click the icon to view the standard and actual information.) Read the @uirements. 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) 5200 x $ 18 = $ 93,600 Direct materials (usage) 4,700 x $ 18 = $ 34.500 Next determine the formula and calculate the cost for the exible budget. | x Flexible budget cost Direct materials I x Next determine the formula and calculate the cost for the flexible budget. X = Flexible budget cost Direct materials Actual input Actual price Budgeted input for actual output Budgeted priceBest Bikes established the following standards based upon the company's experience with their previous suppliers. The standards an as follows: Cost of titanium $18 per pound Titanium used per bicycle 8 lbs. Actual results for the rst month using the online supplier of titanium are as follows: Bicycles produced 400 Titanium purchased 5,200 lb. for $88,400 Titanium used in production 4,700 lb. 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 Best Bikes? Explain why or why not. 4. Should Michael Bentfield'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? 5. Other than performance evaluation, what reasons are there for calculating variances? 6. . What future problems could result from Best Bikes' decision to buy a lower quality of titanium from the online marketplace