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Rest of formats aren't available until this one is completed in program ^ Katharine Hoffman is the owner of Superior Bikes, a company that produces
Rest of formats aren't available until this one is completed in program ^
Katharine Hoffman is the owner of Superior Bikes, a company that produces high-quality cross-country bicycles. Superior Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Superior Bikes has purchased titanium from suppliers in the supply chain. Superior 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, Superior Bikes hired Michael Samson, a recent graduate from State Universty, 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 actual input at the budgeted price. Actual input xBudgeted priceCost Direct materials (purchases) Direct materials (usage) Superior Bikes established the following standards based on the company's experience with previous suppliers. The standards are as follows: $ 19 per pound 8 lbs Cost of titanium Titanium used per bicycle Actual results for the first month using the online supplier of titanium are: 850 8,300 lbs. for $141,100 7,800 lbs. Bicycles produced Titanium purchased Titanium used in production 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 Superior Bikes? Explain why or why not. 4. 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 Hoffman 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 if Superior Bikes purchased lower-quality titanium from the online marketplaceStep by Step Solution
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