Preview

Squeaky Horn Company

Good Essays
Open Document
Open Document
1100 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Squeaky Horn Company
For the Squeaky Horn Company, it faces with decreases in profitability. To solve this problem, the company has two alternatives. Alternative 1: Status Quo Alternative 2: Charge minor band repairs on a flat-fee basis and pay the band repairers on per-job basis and charge delivery fees. Alternative One The company can choose to stick to its original costing system and make no changes to the current business model. Advantages: Under the original system, both owners and employees are familiar with the current status and can work comfortably as usual. The service quality would stay the same and the original customers are also familiar with the company’s service and pricing system and could remain loyal to the company. Moreover, the current costing system and pricing system are consistent with the market niche strategy. Although there is a decrease in profitability, the company is still profitable and there is no risk of losing profits or customers since there are no changes. Disadvantages: The current costing system has some loopholes that result in the lack of efficiency, which in turn leads to the decline in profits. Since the company pays the employees as it planned, there would be zero labor rate variance. The only existing variance that leads to the difference between planned budget and actual budget is labor efficiency variance. As we can see from appendix A, the major unfavorable efficiency difference is under minor band repairs, which is $34,800. Major jobs are performed by the three owners. Since the actual hour per job is the same as planned hour per job for major band repairs, labor efficiency variance does not exist for band major repairs. As for orchestral major repairs, although there is one-hour difference between actual hours per job and planned hours per job, this does not result many differences for the reason that the

You May Also Find These Documents Helpful

  • Satisfactory Essays

    This means that every machine hour costs the business $2.70. Therefore, during a year that incurs 132,600 hours, we can say that budgeted costs are $358,020, which is a favorable variance from actual costs of $363,036. Remember, when expenses are lower than expected it is favorable, but if revenues are lower than expected it is unfavorable. Many professors often ask you to explain this in your response.…

    • 391 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    By using a budget the management team can predict their future costs and cash needs, plan production, etc. Variance reports can help the managers to identify specific functional areas where they came in either over or under budget. They will try to repeat their successes and get rid of their failures. Each month they hope to become a little more efficient.…

    • 683 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Text Questions 6

    • 317 Words
    • 1 Page

    A budget variance is any difference between a budget and what was actually spent during the time period.…

    • 317 Words
    • 1 Page
    Satisfactory Essays
  • Satisfactory Essays

    When considering budget variance, it can be very important to differentiate between the things that affect the budget that can be controlled and those that cannot. There are a number of reasons why a budget variance can occur. One reason is that the budget was poorly planned. This is an example of a controllable factor (WiseGeek 2012).…

    • 462 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    The OM company has ever faced a change in customer-behavior. Initially, services stopped at the hospital’s loading door. At now, low-unit-of-measure or stockless systems become popular at customers, for instance, plastic totes that go directly to the nursing and surgical units, bypassing the entire storeroom process. The entire service-level increased. In 1994, the Activity-Based Costing method was introduced at O&M. Under ABC model, the cost drivers can affect cost per customer, and hence customer profitably. At O&M, cost-plus pricing was the dominant form of pricing in the medical or surgical distribution industry. Customer pays a base manufacturer price plus a markup added on by the distributor. Cost-plus fees are individually negotiated with the customer.…

    • 583 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Variance Analysis

    • 1020 Words
    • 3 Pages

    Variance Analysis is utilized to support the management during the initial stages. It is the procedure of investigating each variance between the actual and budgeted costs to determine the reasons as to why the planned amount was not met, in more detailed explanation (Ventureline, 2012). There are several influences that contribute to the variance report and one is the department’s assumptions, second is the possible risk for this assumption, and third is the actual expense used for the budget. Let’s say the CEO or Director announces the monthly budget that the department needs to meet. Once the department receives the monthly budget outcomes, the budget for supplies was not properly utilized; therefore the salary is higher than the premeditated budget.…

    • 1020 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Bsg quiz 2 full part

    • 4120 Words
    • 22 Pages

    The most effective way for a company to achieve labor costs per pair produced that are below the industry average is to give…

    • 4120 Words
    • 22 Pages
    Good Essays
  • Powerful Essays

    John Deere Case Study

    • 1761 Words
    • 8 Pages

    The existing cost system is strong in that it is simple and easy to maintain.…

    • 1761 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    The Squeaky Horn

    • 2102 Words
    • 9 Pages

    Canadian GDP has been showing an increase trend from 2001 to 2010 as showed in Appendix 1, even though between 2008 and 2009, GDP had a negative growth rate of 2.8%, the 3.3% of increase in GDP at 2010 pull up the figure again to make an overall increase trend. Because of the significant increase in GDP over the past decade, consumers have more money spend on entertainment and education. Thus, more people tend to go to watch art shows and learn to play musical instruments. If looking at Appendix 2, the first chart shows clearly that the average household spends more money in entertainment outside home in 2003 than 1998. For example, people spend $20 more on performing arts on average per year. It implies that an increasing number of people will go listen to a concert,…

    • 2102 Words
    • 9 Pages
    Powerful Essays
  • Good Essays

    It is a strategy that has enabled it to position itself in the minds of the clients. Pursuing it has allowed the firm to sustain a relatively distinct advantage over the rivals. Moreover, the low-cost strategy allows it to have leverage through not passing additional fees to the clients. The culture has also contributed to the success of it value chain that has enabled it to perform cost effectively in comparison to their competitors. The service branch with regards to its value chain, it can double its recuperation cost through the announcement of customer savings. Competitive leverage emanates from the customers being made to comprehend the value that ticket prices that result in the increase in the company's market share. Therefore, the strategic operations of the company are aligned with the culture that the company has integrated within the organization that puts a lot of emphasis on the workers (Srinivasan,…

    • 666 Words
    • 3 Pages
    Good Essays
  • Better Essays

    Health Records Structures

    • 1567 Words
    • 7 Pages

    As with any system there are also negatives. Implementation costs related to the actual system as well as training, education and workflow redesign can be a concern especially when implementation costs may not be worth the benefit of the system.…

    • 1567 Words
    • 7 Pages
    Better Essays
  • Satisfactory Essays

    Pricing Simulation Report

    • 541 Words
    • 2 Pages

    We were able to run this situation three different times and therefore were able to apply different pricing strategies. In the end of each run, our aim was to improve the financial results of the company, either in terms of cumulative profit, financial market share, cumulative unit sales, capacity utilization and final month’s profit. For this, we could only change the prices applied by the company in weekdays and on weekends.…

    • 541 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    As commonly calculated the cost-per-defect metric measures the hours associated with defect repairs and the numbers of defects repaired and then multiplies the results by burdened costs per hour.…

    • 7101 Words
    • 29 Pages
    Good Essays
  • Good Essays

    Labor Rate

    • 542 Words
    • 3 Pages

    The labor rate variance is the difference between the actual labor rate paid and the standard rate, multiplied by the number of actual hours worked. The formula is: Actual rate - Standard rate x Actual hours worked = Labor rate variance. An unfavorable variance means that the cost of labor was more expensive than anticipated, while a favorable variance indicates that the cost of labor was less expensive than planned. There are a number of possible causes of a labor rate variance. The labor rate variance will not be zero because workers ate under contract. Wage rates paid to workers are quite predictable. Nevertheless, rate variances can arise because of the way labor is used. Skilled workers with high hourly rates of pay may be given duties that require little skill and call for lower hourly rates of pay. This will result in an unfavorable labor rate variance, since the actual hourly rate of pay will exceed the standard rate specified for the particular task. In contrast, a favorable rate variance would result when workers who are paid at a rate lower than specified in the standard are assigned to the task. However, the lower-paid workers may not be as efficient. Finally, overtime work at premium rates will result in an unfavorable rate variance if the overtime premium is charged to the direct labor account.…

    • 542 Words
    • 3 Pages
    Good Essays

Related Topics