4 questions (1) A full revenue variance analysis, which would include the following: a. All revenue variances using gross revenues b. All applicable variances for variable selling costs c. All...

1 answer below »
4 questions
(1) A full revenue variance analysis, which would include the following:
a. All revenue variances using gross revenues
b. All applicable variances for variable selling costs
c. All applicable variances for fixed selling costs
(2) A full cost variance analysis, which would include, where applicable, the spending, efficiency, and activity variances for each cost category, including:
a. Materials
b. Labor
c. Variable overhead
d. Fixed overhead
(3) A calculation of the bonuses for each of the three managers based on the variances calculated and incentive plan details provided earlier.
(4) A 300-500 word statement regarding your opinion of the incentive plan, the outcomes, and potential improvements . . . basically, advice that you might provide Toni regarding the situation, based on your analysis.


Case PDF 1 CH Company Toni Halliday is employed by the Curve Corporation, a publicly traded conglomerate. The corporation manufactures and sells many different kinds of products, including plumbing hardware, food products, sporting goods, children's games and toys, and many other products. Halliday is the President of CH Company, a wholly-owned subsidiary of Curve Corporation. It is July 2000 and Halliday has just received the preliminary income statement for her division for the fiscal year ended June 30, 2000. The master budget and overall variances for the same period are included for comparison purposes. Halliday looks at the bottom line, a loss, then picks up the phone to call you. You are an accountant in the controller's office at the headquarters of Curve Corporation. "I know the bottom line looks pretty bad. But we made great strides this year. Sales are higher than ever. Customers love our product and respect our quality. The variances should provide some insights. Could you do a full variance analysis, please?" BACKGROUND AND EVOLUTION The CH Company was founded by Simon Halliday, Toni’s father, in 1982. Halliday was an industrial artist who enjoyed making toys in his spare time. After many years of planning, in 1983, Simon Halliday acquired an old pneumatic pump that had been used to manufacture pillows in the 1950s and 1960s. He modified the machine to mass produce stuffed animals, and the CH Company started to take off. CH has always maintained and prioritized its reputation for quality. And from this quality was borne profits. By 1992, annual sales exceeded $3,000,000. Toni Halliday had learned the business from the bottom up. While a student, she held various positions during the summer and on school breaks. After graduating, she expanded her role in a variety of departments, getting to know the business. Altogether, Toni has held positions in the mail-room, production, sales, and (her favorite) accounting. Based on her performance in theses roles, Toni was named Assistant to the President in 1997 after receiving her M.B.A. In early 1998, at her urging, the company launched an initial public offering of common stock and became publicly traded. After Simon’s retirement, Toni became President of CH on January 1, 1999. On March 31, 1999, Halliday was acquired by Curve Corporation. Halliday ensured the acquisition involved protection for existing employees and managers, as well as for herself. 2 The CH Bear The CH Company produces the CH Bear, a teddy bear enjoyed by children and adult toy collectors around the world. The company touts the handcrafted features of the bear. The bears are fully jointed, constructed of washable acrylic pile fabric, and stuffed with a polyester fiber filling. They stand approximately 17 inches high. The toys are dressed in various accessories, such as bow ties, sports jerseys, or character and occupational costumes. Thus, the product can be personalized for numerous occasions. The CH Bear is sold with an unconditional lifetime guarantee. Organizational Structure A majority of CH’s employees are organized into three departments: purchasing, production, and marketing. The purchasing department consists of Dean Garcia, the purchasing manager, and a staff of ten individuals. The department is responsible for acquiring and maintaining the supply of production materials. William Reid manages over 160 employees in the production department, where the manufacture and assembly of the product takes place. The marketing department is headed by Harriet Wheeler. She is responsible for all aspects of marketing and supervises approximately 50 individuals that make up CH’s marketing department and sales force. The remaining employees include Toni Halliday and a few assistants. BEAR PRODUCTION Production begins with a cutting function that creates the required pieces of acrylic pile fabric. The bolts of fabric are rolled out and layered on the cutting table. The fabric is measured at this time for length and width and inspected for flaws. Flaws, as well as shortages in length or width, increase fabric waste and time inefficiencies, given the rework necessary to fix these problems. CH Bears come in a variety of colors. Fabric dye lots are important for matching colors. Thus, quality control for fabric color is performed as well. Off-color fabric must be scrapped or returned to the supplier. 3 CH obtains the most economical price for specified colors by timing its fabric orders with the production runs of its suppliers. Rush orders almost always substantially increase the price of the required fabric. In the next stage of production, operators of industrial sewing machines construct the various bear parts: arms, legs, head, and torso. Each piece is sewn inside out and then turned right-side- out for assembly. Sewing is the most labor-intensive phase of the production process. Any additional sewing steps (i.e., for specialty bears) require additional production time. In the next step, acrylic eyes are attached to the head with plastic rivets. If the rivet posts are too short, the eyes may fall off later. If the rivet posts are too long, the eyes will stand out from the head, giving a nonstandard appearance. Acrylic eyes are purchased from vendors in “dark brown,” but the exact shade may vary from supplier to supplier. Defects are not discovered until the eyes are used in production. At that point, defective eyes are discarded and replaced with ones that meet specifications. After the cut pieces have been sewn together and the eyes have been attached, the company's unique pneumatic stuffing machine is used to blow the polyester fiber filling into the unassembled parts. Except for a few replacement parts and upgraded motors, this is the same machine that Simon Halliday acquired in 1983. Bags of filling are loaded into the machine hopper and mechanically fluffed to the proper loft. An operator places the empty arm, leg, body, or head over a stationary nozzle and uses a foot pedal to control the flow of filling. The machine operator judges whether the part has been filled correctly. Too little filling affects the firmness of the bear; too much filling is unnecessary and expensive. Inferior grade fiber filling is less expensive but can cause clumping and clogging in the hopper. When this happens, production is interrupted and the operator must unclog the vacuum hose and reset the machine. Next, the arms, legs, and head are attached to the torso using hard plastic disc joints. The disc joints allow the head and limbs to rotate and eliminate the need for sewn attachment. The plastic joints are designed to be foolproof in production and dependable for the life of the product. However, the joints cannot be removed without destroying them. Occasionally, after initial joint insertion, the parts do not fit together properly, and they must he removed and replaced. At the end of the construction process, a woven satin label that states "CH Bear" is attached to the back of each bear. More polyester filling is stuffed into the torso and the back-seam is hand- stitched. Each seam is brushed by hand to give the bear a seamless look. The production process is a continuous source of airborne polyester and acrylic fibers that must be controlled, both to protect the health and safety of the employees and to safeguard the production equipment. The company has taken several steps to control the fibers, including an air filtration system that runs constantly to remove dust and fibers from the factory. Maintenance is important for the sewing machines. Machine oil and static electricity attract pile fabric lint. Lint buildup can cause lines of stitches that are uneven and seams that do not hold. 4 The CH Bear workmanship is guaranteed for life. Burst seams are the biggest cause of rework on bears that have been sent back by customers for repair. All production employees are paid a regular wage for a 40-hour work week. They receive their regular wage plus an overtime premium of one-half the regular wage rate for overtime. Regular wages are charged to direct labor. The cost of fringe benefits and taxes is included in variable overhead costs. PRODUCT MARKETING AND SALES Product Specifics One of the company’s taglines is “CH Bears – Friends with Character.” Each bear comes with a short backstory of the bear, including a description of its “likes” and “dislikes,” favorite kind of stories it likes being read to, and other creative and “customized” dimensions. There are also specialty bears that are used to celebrate holidays and events. Big sellers include graduations, Mother’s Day, Valentine’s Day, and various religious holidays. Bears are customized with seasonal and celebratory costumes, generally referred to as “accessories.” On average the cost of these accessories is relatively small. Given that this cost is small, each bear is assumed to have one accessory (for simplicity). When the company receives an order, an employee takes a bear of the requested color and dresses it according to the customer’s order. Then, the bear is packaged with a protective air bag and shipped in a designer box, which contributes to the product’s image by creating a feeling of exclusivity, and customization. The box is important, especially to toy collectors who “invest” in bears, hoping they will increase in value, if they remain unopened and in the original box. CH purchases these boxes from another company. When purchased in large volumes, there is a discount that can be secured. Rush orders on
Answered Same DayJun 30, 2021

Answer To: 4 questions (1) A full revenue variance analysis, which would include the following: a. All revenue...

Sweety answered on Jul 02 2021
141 Votes
1. Revenue Variance Analysis
    1 (a). REVENUE VARIANCE ANALYSIS
    Particulars    ACTUAL            BUDGETED            Sales Variance    Sale Price / spending
Variance    Sale Volume /efficiency
Variance
        Unit Sold    Price per Unit    Total(in $)    Unit Sold    Price per Unit    Total(in $)
    Retail    188,898.00    55.00    10,389,390.00    215,000    56.00    12,040,00
0.00    (1,650,610.00)    (188,898.00)    (1,461,712.00)
    Wholesale    49,710.00    38.00    1,888,980.00    80,000    37.00    2,960,000.00    (1,071,020.00)    49,710.00    (1,120,730.00)
    Amazon    92,792.00    49.00    4,546,808.00    0    0    0    4,546,808.00    4,546,808.00    - 0
    TOTAL    331,400.00    142.00    16,825,178.00    295,000.00    93.00    15,000,000.00    1,825,178.00    4,407,620.00    (2,582,442.00)
    1 (b) & 1(c). APPLICABLE VARIANCE OF VARIABLE SELLING EXPENSE & FIXED SELLING EXPENSE.
    Particulars    F.Y. 1999        F.Y. 2000        F.Y. 2000        Total
Variance
        Actual        Actual        Flexible Budget
        Rate p.u.    Total    Rate p.u.    Total    Rate p.u.    Total
    Unit Sold        271,971        331,400        295,000
            Amount (in $)        Amount (in $)        Amount (in $)
    Variable Selling Expenses ($)    
    Packing and shipping    4.33    1,176,929.00    4.80    1,589,900.00    4.33    1,277,350.00    (312,550.00)
    Commissions    0.92    249,330.00    0.38    125,789.00    0.92    271,400.00    145,611.00
    Marketing materials    0.28    75,956.00    0.50    164,090.00    0.28    82,600.00    (81,490.00)
    Total variable selling exp    5.52    1,502,215.00    5.67    1,879,779.00    5.53    1,631,350.00    (248,429.00)
    Fixed Selling Expenses ($)
    Salaries        2,726,091.00        3,274,871.00        2,726,091.00    (548,780.00)
    Advertising and promotion        2,440,501.00        2,590,944.00        2,440,501.00    (150,443.00)
    Total fixed selling exp        5,166,592.00        5,865,815.00        5,166,592.00    (699,223.00)
2.FULL COST VARIANCE
    2. FULL COST VARIANCE ANALYSIS
    The table below represnet Variance analysis of material cost , labor cost & variable overhead .
    Particulars     Input
Unit    Standard input used per unit sold
    standard price(dollar) per Input used
    standard price(dollar) per unit produced
    Master Budget        Actual                 Standard cost                    Total cost Variance
    Spending/
Price
variance    Efficiency/
yield
Variance
                        Budgeted unit
sold    Budgeted cost
(in $)    Actual unit
sold    Actual Input
used    Price per
input used    Actual Cost
(in $)    Actual unit sold    Standard input used per unit sold
    Total Input used based on standard input used per unit sold & actual unit sold    Standard
price
per input    Total standard cost (in $)
    Unit Sold of Bear    - 0    - 0    - 0        295,000.00    - 0    331,400.00        - 0    - 0    331,400.00    - 0        - 0    - 0    - 0    - 0    - 0
    Direct materials
    Actrylic pile fabric    bolts    0.03    36.00    0.96        283,872.60        8,345.00    34.56    288,403.20        0.03    8,858.32    36.00    318,899.59    30,496.39    12,016.80    18,479.59
    Acrylic eyes    eyes    2.00    0.21    0.42        123,900.00        661,248.00    0.21    138,862.08        2.00    662,800.00    0.21    139,188.00    325.92    - 0    325.92
    Plastic joints    joints    5.00    0.15    0.75        221,250.00        1,937,023.00    0.15    288,035.32        5.00    1,657,000.00    0.15    248,550.00    (39,485.32)    2,518.13    (42,003.45)
    Polyester fiber filling    pounds    0.90    1.61    1.45        427,455.00        354,164.00    1.51    534,787.64        0.90    298,260.00    1.61    480,198.60    (54,589.04)    35,416.40    (90,005.44)
    Label    label    1.00    0.06    0.06        17,700.00        328,447.00    0.06    19,706.82        1.00    331,400.00    0.06    19,884.00    177.18    - 0    177.18
    Designer...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here