Rust Belt Mufflers

A. CALCULATE MATERIALS AND LABOR VARIANCES FOR EACH OF THE THREE BUFFALO SHOPS. EVALUATE THE RELATIVE PERFORMANCE OF EACH SHOP BASED ON THE CALCULATED VARIANCES. Materials variance: Missing the detail for quantity figures for installations, the total materials variance cannot be split into price and quantity. Variance is actual price of installation materials minus standard cost times the number of performed installations: Pa x Qa – Ps x Qs

Actual Pa State St. Dewey Ave Mt Hope Ave Qa Pa x Qa $710.500 $1.346.125 $759.000 Ps $60 $60 $60 Qs 14.500 22.250 11.500 Standard Ps x Qs $870.000 $1.335.000 $690.000 $159.500 -$11.125 -$69.000 Variance

Ps x Qs State St. Dewey Ave Mt Hope Ave $870.000 $1.335.000 $690.000

Variance $159.500 -$11.125 -$69.000

Variation from Standard 18,33% -0,83% -10,00%

Direct labor variance: In the case of direct labor we have enough data to split the total variance into price and quantity. Variance is actual price of direct labor minus the amount that should have been spent according to the standards: Wa x Ha – Ws x Hs

Actual Ws State St. Dewey Ave Mt Hope Ave $11 $12 $13 Ha 11.600 21.138 12.650 Wa x Ha $127.600 $253.656 $164.450 Ws $11,8 $11,8 $11,8 Standard Hs 14.500 22.250 11.500 Ws x Hs $171.100 $262.550 $135.700 $43.500 $8.894 -$28.750 Variance

Ws x Hs State St. Dewey Ave Mt Hope Ave $171.100 $262.550 $135.700

Variance $43.500 $8.894 -$28.750

Variation from Standard 25,42% 3,39% -21,19%

(in red unfavourable variances)

Total variances for the Buffalo shops:

Materials State St. Dewey Ave Mt Hope Ave $159.500 -$11.125 -$69.000 Direct Labor $43.500 $8.894 -$28.750 Total Variances $203.000 -$2.231 -$97.750

State St is buying materials below standard price and at a lower price than the other Buffalo shops. They are paying below standard labor rates and taking less than an hour to install each muffler. They are a strong performer but since the other two shops confirm the somewhat low standards this performance...