Waltham Motors Division

Management had difficulties in communicating the two variances to its senior managers. The calculation of the two variances started with the standard fixed cost per ton which was derived by following formula:

Overhead costs need to be accounted for this way we can understand just how much cost goes into producing each unit. There are other cost factors that contribute to the product aside from labor and material. Since the projected and the actual sales volumes do not align Kelly should be concerned with the other

11. If 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is the total amount expressed on a per unit basis?

Although the financial goal is to create profit, we need to calculate the breakeven point to get started.

3. Post the file from the same page where you accessed this Assignment, using the

* 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,

Based on the Excel Problem of chapter one, if the total capacity for this business is 725 will you stay in it? If you want to stay in it what price you need to obtain a break even point of 725?

In production costs variance chart above, Direct labor price variance(sum of direct labor variances of round, square and oval) valued at $14,913, and Oval production cost variance valued at $8,381.

Sharon Michaels, the division controller, is concerned regarding the performance at Waltham Motors Division for the month of May. The company lost a major customer contact during this time, and she needs the performance report analyzed. Sharon Michaels must report the information to the corporate headquarters of Marco Corporation. Waltham Motors is a subsidiary of Marco Corporation and was acquired in late 2003. This analysis is for the month of May 2004.

Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.

3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?

In the case study, as the annual fixed cost is $6,000,000 and the contribution margin per event is $1,900. Therefore, the breakeven point is at the 3,158

It will be tough to believe that much of 69 % of unfavorable variance shown in exhibit 6 of case can be explained by above mentioned problems. Therefore, my hunch is that either the Project Managers/Design engineers were not making right assumptions about a particular job or it is the workforce who is putting inflated numbers on the shop floor time spent on one particular job. In both the cases, it is project manager’s job to improve the operational efficiency in order to reduce the difference between the actual and the budgeted hours. As evident from the calculation mentioned in the attached exhibit1 , if the revenues are to be calculated only using budgeted hours which means only the budged hours are spent on the Job , CMR can get the positive 16% value add on its EBIT / Revenues.

8. I would like to remove allocated costs and fixed overheads and see what would be the variable cost. If this is done, you can see that the variable cost hovers around 7 FF. ( Not many of you have done this)

* What is the role provided by break-even point and how would you calculate this point?