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Quiz 09 & 10_Solution - 6A:130 Fall 2007 Quiz 9 10 QUIZ...

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6A:130 – Fall 2007 Quiz 9 & 10 1 of 8 QUIZ 9 & 10: This quiz is worth 20 points total. It will be subdivided into two 10 point quizzes. This is due in my office by 4:00pm on TUESDAY, NOVEMBER 27. Solution will be available at 5:00pm on Tuesday (11/27). To receive credit you must show your work . STU Company is a manufacturer of high-end walking/hiking staffs. They make the sticks out of two types of material – titanium and aluminum. The owner of the company is pleased that they made a profit; however, she is curious as to what caused the operating income to be $845,000 lower than plan. In addition, she would like your suggestions on the underlying causes of the variances and a course of action for improvement. Actual Budget Difference Sales revenue 5,130,000 $ 5,600,000 $ 470,000 $ U Costs 4,795,000 4,420,000 375,000 U Operating profits 335,000 $ 1,180,000 $ 845,000 $ U Additional detail information follows: STU Company Budget & Actual data for the year ending June 30 Master Description Budget Actual Market size 80,000 60,000 Market share 25% 30% Sales volume 20,000 18,000 TI Staffs 4,000 5,400 AL Staffs 16,000 12,600 Total sales volume 20,000 18,000 Selling price: TI Staffs 400.00 $ 390.00 $ AL Staffs 250.00 $ 240.00 $ Variable costs (inputs) Titanium Staffs DM -- Units/product 1.0 2.0 DM -- Price/u 50.00 $ 30.00 $ DL -- Hours/product 3.0 4.0 DL -- Rate/hour 25.00 $ 30.00 $ VMOH -- DLH/product 3.0 4.0 VMOH -- Rate/hour 45.00 $ 50.00 $ Aluminum Staffs DM -- Units/product 2.0 3.0 DM -- Price/u 20.00 $ 12.00 $ DL -- Hours/product 2.0 1.8 DL -- Rate/hour 25.00 $ 30.00 $ VMOH -- DLH/product 2.0 1.8 VMOH -- Rate/hour 45.00 $ 50.00 $ FMOH 500,000 $ 475,000 $
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