3 7 34 to boss from junior accountant re benchmarking

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3.
7-34 To: Boss From: Junior Accountant Re: Benchmarking & productivity improvements Date: October 15, 2010 Benchmarking advantages - we can see how productive we are relative to our competition - we can see the specific areas in which there may be opportunities for us to reduce costs Benchmarking disadvantages - some of our competitors are targeting the market for high-end and custom-made lenses. I'm not sure that looking at their costs helps with understanding ours better - we may focus too much on cost differentials and not enough on differentiating ourselves, maintaining our competitive advantages, and growing our margins Areas to discuss - we may want to find out whether we can get the same lower price for glass as Firm D - can we use Firm B’s materials efficiency and Firm C’s variable overhead consumption levels as our standards for the coming year?
7-35 7-39(60 min.) Comprehensive variance analysis review. Actual ResultsUnits sold (90% × 2,000,000) 1,800,000 Selling price per unit $4.80 Revenues (1,800,000 × $4.80) $8,640,000 Direct materials purchased and used: Direct materials per unit $0.80 Total direct materials cost (1,800,000 × $0.80) $1,440,000 Direct manufacturing labor: Actual manufacturing rate per hour $15 Labor productivity per hour in units 250 Manufacturing labor-hours of input (1,800,000 ÷ 250) 7,200 Total direct manufacturing labor costs (7,200 × $15) $108,000 Direct marketing costs: Direct marketing cost per unit $0.30 Total direct marketing costs (1,800,000 × $0.30) $540,000 Fixed costs ($850,000 -$30,000) $820,000 Static Budgeted Amounts Units sold 2,000,000 Selling price per unit $5.00 Revenues (2,000,000 × $5.00) $10,000,000 Direct materials purchased and used: Direct materials per unit $0.85 Total direct materials costs (2,000,000 × $0.85) $1,700,000 Direct manufacturing labor: Direct manufacturing rate per hour $15.00 Labor productivity per hour in units 300 Manufacturing labor-hours of input (2,000,000 ÷ 300) 6,667 Total direct manufacturing labor cost (6,667 × $15.00) $100,000 Direct marketing costs: Direct marketing cost per unit $0.30 Total direct marketing cost (2,000,000 × $0.30) $600,000 Fixed costs $850,000 1.Actual Static-Budget Results Amounts Revenues $8,640,000$10,000,000Variable costs Direct materials 1,440,000 1,700,000 Direct manufacturing labor 108,000 100,000 Direct marketing costs 540,000600,000Total variable costs 2,088,0002,400,000Contribution margin 6,552,000 7,600,000 Fixed costs 820,000850,000Operating income $5,732,000$6,750,0002. Actual operating income $5,732,000 Static-budget operating income 6,750,000Total static-budget variance $1,018,000U
7-36 Flexible-budget-based variance analysis for Sonnet, Inc. for March 2010 Actual Results Flexible-Budget Variances Flexible Budget Sales-Volume Variances Static Budget Units (diskettes) sold 1,800,00001,800,000200,0002,000,000Revenues Variable costs Direct materials Direct manuf. labor Direct marketing costs Total variable costs $8,640,0001,440,000 108,000 540,0002,088,000$360,000U 90,000 F 18,000 U 072,000F $9,000,0001,530,000 90,000 540,0002,160,000$1,000,000U 170,000 F 10,000 F 60,000F 240,000F $10,000,0001,700,000 100,000 600,0002,400,000Contribution margin 6,552,000 288,000 U 6,840,000 760,000 U 7,600,000 Fixed costs 820,00030,000F 850,0000850,000Operating income $5,732,000$258,000U $5,990,000$ 760,000U $6,750,0003. Flexible-budget operating income = $5,990,000. 4. Flexible-budget variance for operating income = $258,000U.

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