Some really great ideas out here.There are several different steps Moyer can take to improve his bottom line.A fairly comprehensive list is:

• What can we learn from labor of frames that could help us - implement some of their practices in other areas?
• What is causing the rework variances/what can we do to address/monitor?
• Efficiencies in Processes
• Material costs are a problem /what are some options to address them/Economies of Scale.
• Sales Pricing.

NEED THE DETAIL ANSWERS FOR ABOVE QUESTION AS SOON AS POSSIBLE

1. Should Bob Moyer be concerned about Mile High Cycles' performance? How significant are these variances? In 2004, Mile High Cycles incurred $11.97M in total annual costs, $1.07M more than originally budgeted. The variance is driven by the production of additional units, applied overhead costs, and variance in usage and pricing of materials. If MHC had produced the additional 800 units at the budgeted usage and pricing of materials, their total costs would have been $1.71M, $259K below their actuals. The $259K unfavorable variance to the flexible budget is a result of; applied overhead costs ($60K/U), usage ($279K/F), and pricing ($478K/U). The usage and pricing variance reveals that they used less material/labor but paid more per material/labor than planned. This is why Bob should be concerned about the performance. The significance of these variances depends on the percentage variance, frequency, and whether it was accounted for in the original budget. 2. Where should Bob Moyer direct his attention? Why? Kits & Reworking of Parts Two of the areas Mr. Moyer should direct his attention is in the process of purchasing, and reworking kits; these are processes that either caused the largest unfavorable variance or resulted in unplanned expenses. The largest unfavorable variance for Mile High Cycles (MHC) is the price of kits purchased by outside supplier for the wheel and frame assembly departments. In 2004, the cost of the kits purchased by the wheel assembly department increased by $2/kit and the kits purchased by the final assembly department increased by $17/kit, at the 10,800 units produced this amounts to $205K in additional expenses. In addition to the increased price of the kits, Mile High Cycles had a total $70K in expenses, which were not planned, related to reworking parts from the kits. In total, the increased price of the kits and expenses around reworking parts, amount to $275K. Labor Hours The actual results for the labor usage reflect an overall favorable variance of $117K; which means they required fewer hours than originally planned to complete the work. This variance, even though favorable, is significant and Mr. Moyer needs to understand what are the drivers. Drivers could be: the higher quality products purchased required less manipulation and therefore fewer labor hours; higher skilled workers, considering MHC paid an additional $0.50/hr. in wages; outdated standards; or truly superior performance. Practical standard, with reasonable effort, produce meaningful variances, where positive variances typically represent superior performance, and negative variances represent inferior performance (Edmonds, Edmonds, Tsay & Olds, 2016). MHC needs to monitor these standards regularly and adjusts accordingly. Steel Tubing Costing & Usage The largest direct cost variances for the frame assembly department are usage savings of $162K and an extra $170K expense for the purchasing of steel tubing. Steel tubing was expected to cost $330.00 per bicycle. The actual expenses reflect that MHC spent an additional $0.75/bike, creating an unfavorable variance of $8K. Calculating the price/rate variance reflects an unfavorable variance of $170K. Conversely, the calculated usage variance reveals a favorable $162K variance. Although this dictates that they are using less steel than expected, when netted against the unfavorable amount of the price/rate variance, an overall unfavorable variance of $8K remains. Essentially, this means that Mile High Cycles is overpaying for their products or did not estimate the purchasing price accurately. Similarly, Mile High Cycles could have purchased a higher quality product at a higher cost than was originally expected, resulting in less waste and less steel being used. If they did purchase a higher quality steel, they should reconsider since the usage variance is not large enough to offset the unfavorable price variance. 3. What should he do? Overall suggestions: Upon review of the above discrepancies, it is in the best interest of Mr. Moyer and Mile High Cycles to call to meeting with all the leadership of the company. Mr. Moyer must address the above points with his staff, and must immediately assign areas of responsibility to his team to facilitate necessary action. Mr. Moyer must speak and listen to the employees who operate in the wheel and final assembly areas. Wheel and final assembly production areas require rework which has cost the company more money than it should. Mr. Moyer should challenge employees to refine and improve the process that could reduce the cost, and incentivise the process with paid vacation days for a team of employees that offer a solution that fixes the issue. Concurrently, Mr. Moyer should look into the cost analysis of hiring subject matter specialists and or replacing the manufacturing equipment with newer models that offer less error in assembly. Executing either option offers the ability to reduce unfavorable costs. Mr. Moyer should look into competitor suppliers who sell equipment and material. Mr. Moyer should seek to renegotiate prices with the outside supplier, if not, research competitors that would offer prices at a lower cost than current suppliers to further assist with reducing the variance. Mr. Moyer and the team must identify a better method of assembling and shipping bicycles to dealers to reduce this variance. Collectively, $70,000 in losses can be attributed to reworking. The current kits required for final assembly are very expensive and are the most expensive item required for the entire bicycle Mile High Cycles should look into making the products in-house instead of purchasing kits from suppliers. While there will be a high initial cost, in the long term, developing these products themselves could be cheaper than purchasing externally. Mr. Moyer should work with HR to better align pay scales with job responsibilities. They should also focus on establishing a wage ceiling which is a limit on how much an individual can earn. In addition, they should investigate how long it takes to produce one bike to see if they need to adjust their standard and if the number of employees suits a number of units anticipated to be produced. Below is a specific breakdown of recommendations as to how Mr. Moyer could work with stakeholders and subject matter specialists, especially since the total unfavorable variance is $275K: Kits Why did the price increase? Is it because the parts are higher quality? Doubt that this is the case since there were unplanned expenses related to reworking parts. Did the market price increase from other suppliers? If the market price increased, is our standard correct or do we need to adjust to account for the increase? Can we negotiate the price? Are there other suppliers we can purchase the kits from at a lower price? Why are we purchasing kits instead of making them inhouse? What are the pros and cons of making the kits in-house? Is there a cost benefit to making the kits in-house? Reworking parts What are some examples of why we had to rework parts? Why did we not plan for these expenses? Is this a one-time expense or is this an expense we incur regularly. If this is an expense we incur regularly, do we need to adjust our standards to account for this expense? Can we avoid this expense if we are to make the parts in-house instead of purchase kits from outside suppliers