ACT 8-1 - Business Applications Case: Statistic versus flexible budget variances
a) Did Atlantic increase unit sales by cutting prices or by using some other strategy?
Atlantic did not increase sales by cutting prices for the actual sales price was higher than the budgeted price which is as follows:
The budgeted sales price was $33,000,000/150,000 units = $220 per unit (Edmonds, Tsay, & Olds, 2011). Therefore, the actual sales price was $35,520,000/160,000 units = $222 per unit (Edmonds et al., 2011). Hence, Atlantic utilized a different strategy than cutting prices to increase its unit sales. The increase could have been an increase in demand for the product(s) or by increasing its advertisement campaign.
b) Is Mr. Ludwig correct in his conclusion that something is wrong with the company’s performance evaluation process? If so, what do you suggest be done to improve the system?
Mr. Ludwig is correct in his conclusion that something is wrong with the company’s performance evaluation process for employees are receiving bonuses when sales are low; however, when sales are high, they are not receiving bonuses because they used more labor and materials to make manufacture more products (Edmonds et al., 2011).
In order to improve the system, I would …show more content…
In this case, the labor price variance was favorable; therefore, Atlantic Lighting Systems paid less than the standard rate of labor (Edmonds et al., 2011). Since the total variance is comprised of both labor usage and labor price variances, they would have to counterpoise one another in order for the total variance to be favorable (Edmonds et al., 2011). Consequently, if both were unfavorable, then the total variance would also be unfavorable; however, this is not the case with Atlantic Lighting Systems (Edmonds et al.,
a) Did Atlantic increase unit sales by cutting prices or by using some other strategy?
Atlantic did not increase sales by cutting prices for the actual sales price was higher than the budgeted price which is as follows:
The budgeted sales price was $33,000,000/150,000 units = $220 per unit (Edmonds, Tsay, & Olds, 2011). Therefore, the actual sales price was $35,520,000/160,000 units = $222 per unit (Edmonds et al., 2011). Hence, Atlantic utilized a different strategy than cutting prices to increase its unit sales. The increase could have been an increase in demand for the product(s) or by increasing its advertisement campaign.
b) Is Mr. Ludwig correct in his conclusion that something is wrong with the company’s performance evaluation process? If so, what do you suggest be done to improve the system?
Mr. Ludwig is correct in his conclusion that something is wrong with the company’s performance evaluation process for employees are receiving bonuses when sales are low; however, when sales are high, they are not receiving bonuses because they used more labor and materials to make manufacture more products (Edmonds et al., 2011).
In order to improve the system, I would …show more content…
In this case, the labor price variance was favorable; therefore, Atlantic Lighting Systems paid less than the standard rate of labor (Edmonds et al., 2011). Since the total variance is comprised of both labor usage and labor price variances, they would have to counterpoise one another in order for the total variance to be favorable (Edmonds et al., 2011). Consequently, if both were unfavorable, then the total variance would also be unfavorable; however, this is not the case with Atlantic Lighting Systems (Edmonds et al.,