Mile High Cycles Write-Up. Question 4 ONLY (at least 300 words).

  

Mile High Cycles.pdfI have answered questions 2 and 3. See attached. I only need you to answer question 4. Please write 300 words or more.Answer the following questions:2. Using the approach discussed in Week 3, Presentation 3, develop a 2004 flexible budget, and compute the flexible – actual variances.3. Determine direct cost variances (six for Frame; four each for Wheel and Final) and two overhead variances.4. Should Bob Moyer be concerned about Mile High Cycles’ performance? How significant are these variances?What is causing these variances? Do you see any patterns or relationships among the variances that suggest possible causes?Where should Bob Moyer direct his attention? Why? What should he do?ACCT6273 Week 4 Assignment – Q2.docxACCT6273 Week 4 Assignment Q3.xlsx
acct6273_week_4_assignment___q2.docx

acct6273_week_4_assignment_q3.xlsx

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The master, flexible, and actual budget along with budget variances can be found in
Exhibit 1. Based on the information presented in the case, it can be seen that there is
an overall unfavorable variance with regards to both variable and overhead costs.
For variable costs, with the exception of frame labor, all raw material and labor
costs were higher than expected. Additionally, there was a total cost of $60,000
necessary for re-working wheel spokes and rims, as well as other miscellaneous
parts. The total overhead costs were $100,000 more than expected, due to
additional “other” costs. This resulted in total annual costs of almost $300,000 more
than expected.
Exhibit 1: Master, Flexible, and Actual Budget for 2004
Production
Sales Revenue
Variable Costs
Frame Tubing
Frame Paint
Frame Labor
Wheel Parts
Wheel Parts Re-Work
Wheel Labor
Final Assembly Parts
Final Assembly Parts Re-Work
Final Assembly Labor
Total Variable Costs
Contribution Margin
Overhead Costs
Rent
Office Staff
Depreciation
Other Costs
Total Overhead Costs
Total Annual Costs
Net Income
Master Budget
10,000 bicycles
$12,037,037.04
Flexible Budget
10,800 bicycles
$13,000,000.00
Actual Budget
10,800 bicycles
$13,000,000
Flexible Budget Variances
Favorable or Unfavorable
$0.00

$3,300,000.00
$25,000.00
$1,500,000.00
$1,200,000.00
-$65,000.00
$3,500,000.00
-$105,000.00
$9,695,000.00
$2,342,037.04
$3,564,000.00
$27,000.00
$1,620,000.00
$1,296,000.00
-$70,200.00
$3,780,000.00
-$113,400.00
$10,470,600.00
$2,529,400.00
$3,572,100.00
$28,187.00
$1,528,050.00
$1,317,600.00
$25,000.00
$74,250.00
$3,963,600.00
$45,000.00
$116,000.00
$10,669,787.00
$2,330,213.00
$8,100.00
$1,187.00
($91,950.00)
$21,600.00
$25,000.00
$4,050.00
$183,600.00
$45,000.00
$2,600.00
$199,187.00
($199,187.00)
U
U
F
U
U
U
U
U
U
U
U
$250,000.00
$100,000.00
$100,000.00
$750,000.00
$1,200,000.00
$10,895,000.00
$1,142,037.04
$250,000.00
$100,000.00
$100,000.00
$750,000.00
$1,200,000.00
$11,670,600.00
$1,329,400.00
$250,000.00
$100,000.00
$100,000.00
$850,000.00
$1,300,000.00
$11,969,787.00
$1,030,213.00
$0.00
$0.00
$0.00
$100,000.00
$100,000.00
$299,187.00
($299,187.00)
—U
U
U
U
Master Budget Flexible Budget
Production
10,000 bicycles 10,800 bicycles
Sales Revenue
#########
#########
Variable Costs
Frame Tubing
$3,300,000.00 $3,564,000.00
Frame Paint
$
25,000.00 $
27,000.00
Frame Labor
$1,500,000.00 $1,620,000.00
Wheel Parts
$1,200,000.00 $1,296,000.00
Wheel Parts Re-Work
–Wheel Labor
$
65,000.00 $
70,200.00
Final Assesmbly Parts
$3,500,000.00 $3,780,000.00
Final Assembly Parts Re-Work
–Final Assembly Labor
$ 105,000.00 $ 113,400.00
Total Variable Costs
$9,695,000.00
#########
Contribution Margin
$2,342,037.04 $2,529,400.00
Overhead Costs
Rent
$ 250,000.00 $ 250,000.00
Office Staff
$ 100,000.00 $ 100,000.00
Depreciation
$ 100,000.00 $ 100,000.00
Other Costs (2/3 variable) $ 750,000.00 $ 750,000.00
Total Overhead Costs
$1,200,000.00 $1,200,000.00
Total Annual Costs
#########
#########
Net Income
$1,142,037.04 $1,329,400.00
Actual Budget
10,800 bicycles
$13,000,000
$3,572,100.00
$
28,187.00
$1,528,050.00
$1,317,600.00
$
25,000.00
$
74,250.00
$3,963,600.00
$
45,000.00
$ 116,000.00
#########
$2,330,213.00
$ 250,000.00
$ 100,000.00
$ 100,000.00
$ 850,000.00
$1,300,000.00
#########
$1,030,213.00
Flexible Budget VariancesFavorable or Unfavorable
$0.00
$
$

$8,100.00
$1,187.00
($91,950.00)
$21,600.00
25,000.00
$4,050.00
$183,600.00
45,000.00
$2,600.00
$199,187.00
($199,187.00)
U
U
F
U
U
U
U
U
U
U
U
$0.00
$0.00
$0.00
$100,000.00
$100,000.00
$299,187.00
($299,187.00)
—U
U
U
U

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