Complete variance analysis Gates Video Games manufactures video game machines. Market saturation…

Complete variance analysis
Gates Video Games manufactures video game machines. Market saturation and technological innovations have caused pricing pressures that have resulted in declining profits. To stem the slide in profits until the company can introduce new products, top management has turned its attention to both manufacturing economies and increased production. To realise these objectives, management developed an incentive programme to reward production managers who contribute to an increase in the number of units produced and achieve cost reductions. In addition, the company instituted a JIT purchasing program so that it purchases raw materials on an as-needed basis. The production managers have responded to the pressure to improve manufacturing performance in several ways that have resulted in an increase in the number of completed units over normal production levels. The video game machines put together by the assembly group require parts from both the printed circuit boards (PCB) and the reading heads (RH) departments. To attain increased production levels, the PCB and RH departments started rejecting parts from suppliers that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The maintenance staff is concerned that there will be serious breakdowns and unsafe operating conditions. The more aggressive assembly group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH departments which, when coupled with demands for accelerated parts delivery by the assembly department, has led to more frequent parts rejections and increased friction among departments. Gates Video Games operates under a standard-costing system. The standard costs at a production level of 24,000 units per year are in part A of Exhibit 8.13. Gates Video Games prepares monthly income statements based on actual expenses. Part B of Exhibit 8.13 shows the statement for May, when production and sales both reached 2,200 units. The budgeted sales price was €200 per unit and budgeted (normal) production and sales were 24,000 units per year. Top management was surprised by the low profit in spite of increased sales for May. The original budget had called for income before taxes of €62,000 and with the added sales, the president had expected at least €68,200

of income (€6,200 more income; 200 extra units * €31 per unit). The president called on Michelle Barber, director of cost management, to report on the reasons for the shortfall in income. After a thorough review of the data, Barber prepared the report in part C of Exhibit 8.13.

1 Prepare a budgeted income statement in contribution margin format for Gates Video Games showing why the company expected income before taxes to be €62,000.

2 Assume that you have been given Michelle Barber’s task. Prepare a complete analysis explaining the reason for the difference between the original projected income before taxes of €62,000 and the actual of €47,740. Compute all the variances that are helpful in explaining this difference, and explain what you learn from the variances.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!