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Mile High Cycles

In: Business and Management

Submitted By DannyLee
Words 1875
Pages 8
Week 3 Individual Assignment 1:
Mile High Cycles Case Analysis Questions 1, 2, & 3

ACCT 6273, Section 7
Identifying Strategic Implications in Accounting Data

MILE HIGH CYCLES CASE ANALYSIS

* (Exhibit 3 Below) * (Exhibit 4 Below) * The variances are due to the Mile High Cycle company not forecasting for increased production. The company budgeted for the production of 10,000 cycles but the actual production was 10,800 units. When the company increased production, the production efficiency decreased. The company had to use or rework parts that added extra cost to the expenses; the reworked parts added $25,000 of extra expenses to the wheel assembly production and $45,000 to the final assembly process. The material, labor cost, labor efficiency, and labor rate variances all increased and created unfavorable expenses. The company's overhead cost, which included an assumed other cost section, that was 2/3 variable and 1/3 fixed also increased with the increased production. Mile High's final assembly process has the highest expenses and variance. I think that the company had to utilize different parts suppliers due to short notice of increased production, and when they utilized a different supplier the accuracy of the parts decreased. The purchasing managers could have also been lazying in doing their job, and not negotiated for lower supply prices. Mile High's labor expenses may have increased due to overtime and having to hire new employees. The variable portion of the overhead cost could also be due to a member of management getting a promotion.

Exhibit 3 2004 Flexible Budget Including Flexible - Actual Variances

Exhibit 4 | Master Budget | Flexible Budget | Actual Budget | Flexible Budget Variances | Favorable or Unfavorable | Production | 10,000 bicycles | 10,800 | 10,800 | | | Sales Revenue | $ 12,037,037.04 | $ 13,000,000.00...

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