Question 1(20 marks)

Pyre Mills, Inc. is a producer of men's and women's clothing. The company uses standard costs for all its products. The standard costs and actual costs per one unit of product for a recent period are given below:

Direct material:

Standard: 4.0 square meters at $5.40 per square meter

Actual: 4.4 square meters at $5.05 per square meter

Direct labour:

Standard: 1.6 hours at $6.75 per hour

Actual: 1.4 hours at $7.30 per hour

During this period, the company produced 4,800 units of this product

There was no inventory of materials on hand at the beginning of the period. During the period, 26,000 square meters of material were purchased, and 21,120 square meters were used in production.

Required:

a.For direct materials, compute the price and quantity variances for the period.Indicate for each variance if it is favourable or unfavourable. Provide a reasonable explanation for the quantity variance.

(5 marks)

b.For direct labour, compute the rate and efficiency variances for the period.Indicate for each variance if it is favourable or unfavourable.Provide a reasonable explanation for the rate variance.(5 marks)

Question 2

PROBLEM 11-28 Building a Balanced Scorecard; Service Industry [LOS] Last Peak ski resort was for many years a small, family-owned resort serving day skiers from nearby towns. Lost Peak was recently acquired by Western Resorts, a major ski resort operator. The new owners have plans to upgrade the resort into a destination resort for vacationers. As part of this plan, the new owners would like to make major improvements in the Powder & Lodge, the resort's on-the hill cafeteria. The menu at the lodge is very limited-hamburgers, hot dogs, chili, tuna fish sandwiches. pizzas, french fries, and packaged snacks, With little competition, the previous owners of the resort had felt no urgency to upgrade the food service at the lodge. If skiers want lunch on the mountain, the only alternatives are the Powder & Lodge or a brown bag lunch brought from home. As part of the deal when acquiring Lost Peak, Western Resorts agreed to retain all of the current employees of the resort. The manager of the lodge, while hardworking and enthusiastic, has very little experience in the restaurant business, The manager is responsible for selecting the menu, finding and training employees, and overseeing daily operations. The kitchen staff prepare food and wash dishes. The dining room staff take orders, serve as cashiers, and clean the dining room area. Shortly after taking over Lost Peak, management of Western Resorts held a day-long meeting with all of the employees of the Powder 8 Lodge to discuss the future of the ski resort and the new manage- ment's plans for the lodge. At the end of this meeting. management and lodge employees created a bal- anced scorecard for the lodge that would help guide operations for the coming ski season. Almost everyone who participated in the meeting seemed to be enthusiastic about the scorecard and manage- ment's plans for the lodge. The following performance measures were included on the balanced scorecard for the Powder & Lodge: 4. Weekly Powder 8 Lodge sales b. Weekly Powder & Lodge profit C. Number of menu items Dining area cleanliness as rated by a representative from Western Resorts management E. Customer satisfaction with menu choices as measured by customer surveys Customer satisfaction with service as measured by customer survey's Average time to take an order Average time to prepare an order Percentage of kitchen staff completing a basic cooking course at the local community college Percentage of dining room staff completing a basic hospitality course at the local community college Western Resorts will pay for the costs of staff attending courses at the local community college. Required: . Using the above performance measures, construct a balanced scorecard for the Powder 8 Lodge. Use Exhibit 1 1-5 as a guide. Use arrows to show causal links and indicate with a + or - whether the performance measure should increase or decrease. What hypotheses are built into the balanced scorecard for the Powder 8 Lodge? Which of these hypotheses do you believe are most questionable? Why? 3. How will management know if one of the hypotheses underlying the balanced scorecard is false?Performance Simplified Strategy Map Targets Initiatives Measures Financial Increase Market value 25% per year - Optimize Profitability . Seat revenue 20% per year routes . Plane lease cost . 56 per year Standardize Increase Lower Costs planes Revenue Customer More .On-time First in . Quality Customers arrival rating industry management On-lime . Customer 98% Customer Flights LOWEST ranking Satisfaction loyalty Prices Number of . 7 change program Customers Internal . On-ground time