Bureaucratic Planning and Control
Mile High Cycles Case Study
Business School São Paulo - BSP
Mentor Douglas Oliveira
1) Identify the direct costs and overhead diversities. What may be causing each of the variances to happen?
In the Framework assembly office, the main variances are relevant to the outlook not specific of actual weight in the materials and underestimation of actual rates. See listed below:
Inside the wheel set up department the primary variance is at quantity while shown listed below:
And in addition related to remodel of parts with a direct impact of 25k.
In the last assembly period again the main variance relates to quantity while shown listed below:
And also related to remodel impact of $45k.
Inside the overhead, the key impact is related embrace Other expense of $100k.
The lack of ability to predict selling price variances is a big effects in the costs. The rework should also have been completely budget for for the reason that Company is usually operating since 2003 and they probably understood they had remodel at the time the budget was created. All of us also need to consider that the variances in amount are comparable because if I can sell anything that I develop, this impact will be absolutely no when I promote.
2) Ought to Bob Moyer be concerned about Mile High Cycles' performance? In which should this individual be prepared to direct his interest? What additional information should he try to get hold of?
If he can sell each of the extra production, the impact altogether cost can be reduced in approximately $500k. See reconciliation below:
The total effects in expense per item is only $129k as seen below:
And half of this really is related to remodel (approx $6 per item). We believe this individual should not be concerned as long as he can sell most additional things produced and he should focus his attention in the rework to minimize it to minimum...