Group 4 Financials
Income Reconciliation
Example
Bicycles Sold4,500 4,500
2020Per Bicycle2021Per Bicycle
Sales Dollars19,800,000$ $4,400.0014,850,000$ $3,300.00
Direct Material Costs10,800,000$ $2,400.008,658,220$ $1,924.05
Direct Labor Costs1,552,500 345.00 1,460,025 324.45
Variable Overhead562,500 125.00 551,250 122.50
Total Variable Costs
12,915,000$ 2,870.00$ 10,669,495$ 2,371.00$
Contribution Margin6,885,000$ $1,530.004,180,505$ $929.00
Contribution Margin Percent34.77%28.15%
Selling & General Administration615,000$ 136.67 765,000$ 170.00
Operating Income6,270,000$ $1,393.333,415,505$ $759.00
Wheels of Fortune
Operating Income Statement
20202021
Professional
75%50%
Novice
25%50%
Total Assembled & Sold4,500 4,500
20202021
Frames:Usage3,375 2,363
Price900$ 925$
Parts:Usage3,375 2,295
Price2,100$ 2,165$
Direct Labor Hours33,750 23,175
Direct Labor Rate40$ 42$
Variable Overhead Rate150$ 180$
20202021
Frames:Usage1,125 2,318
Price180$ 190$
Parts:Usage1,125 2,363
Price420$ 450$
Direct Labor Hours6,750 13,905
Direct Labor Rate30$ 35$
Variable Overhead Rate50$ 65$
Wheels of Fortune
Professional
Novice
Summary of Actual Costs
Sales Mix Percent
Difference
Operating Income 20206,270,000$
Total Sales Mix Variance378,000$
Manufacturing Variances
Direct Materials Variance
Usage(336,960)$
Price(370,800)
Direct Labor Variance
Efficiency(101,970)
Rate(48,060)
Variable Overhead Variance
Spending(121,500)
Total Manufacturing Variances(979,290)$
Selling & General Administration(150,000)$
Operating Income 20215,518,710$
(unfavorable)
Wheels of Fortune
Income Reconciliation
Please address case question here. Delete out any words in red before submitting.
Case question 1:
What are your initial observations of the potential causes of the decrease in operating income from 2020 to 2021.
Case question 3:
Recommendations: Based on your financial analysis, generate a professional memo to the partners with your short (less than a year) and long-term (up to five years) recommendations on how to improve the company’s operating income integrating information from the schedules you created. A reader with limited financial expertise (e.g. Lance) should be able to comprehend your analysis and associated recommendations.
| Wheels of Fortune | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year 1 | Year 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Bicycles Sold | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales Mix | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Novice | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bicycles Sold (Units) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling Price per Bicycle | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Sales |
| Wheels of Fortune Variable Cost and | |||
| Contribution Margin | |||
| Direct Materials | Per Bicycle | ||
| Bicycle Kit (Direct Material) | |||
| Direct Labor | |||
| Hours | |||
| Rate per Hour | |||
| Total Direct Labor Cost per Bicycle | |||
| Variable Overhead | |||
| Total Variable Overhead Cost per Bicycle | |||
| Total Variable Cost and Contribution Margin per Bicycle | |||
| Budget Production/Sales | |||
| Budgeted | |||
| Budgeted Fixed Overhead Dollars | |||
| Direct Labor Hours per Bicycyle | |||
| Fixed Overhead Cost per Bicycle | |||
| Total Variable Cost per Bicycle | |||
| Contribution Margin Percent |
_2b
| Wheels of Fortune – Sales Mix Variance | |
| Actual | |
| Unit Sales – Novice | |
| Contribution Margin per bicycle (Sales – DM, DL, VOH) | |
| Unit Sales – Professional | |
| Total contribution margin ((Novice Sales * Novice CM/unit) + (Prof Sales * Prof CM/Unit)) |
| Wheels of Fortune | Direct Materials Variance | |||||
| Direct Material Standard Cost | Per Kit | |||||
| Bicycles Assembled | 2016 | 2017 | ||||
| Direct Materials Actual Cost Per Unit | ||||||
| Bicycle Kits | ||||||
| Direct Materials Actual Usage | ||||||
| Direct Material Price Variance | ||||||
| Total Material Price | ||||||
| Total Direct Material Price Var | ||||||
| Direct Material Usage Variance | ||||||
| Total Direct Material Usage | ||||||
| Total Direct Material Variance | ||||||
| Total Direct Material Variance |
s_2c
| Wheels of Fortune Direct Labor Variance | |
| Standard Direct Labor Rates and Hours | |
| Standard Hours per Bicycle | |
| Standard Labor Rate | |
| Actual Direct Labor Rates, Hours, Dollars | |
| Total Standard Hours | Actual Labor Rate |
| Total Standard Hours | |
| Total Actual Hours | |
| Direct Labor Rate Variance | |
| Total Actual Hours | |
| Total Direct Labor Rate | Total Actual Hours per Bicycle |
| Direct Labor Efficiency Variance | |
| Total Actual Dollars | |
| Total Labor Efficiency | |
| Total Actual Dollars | |
| Total Direct Labor Variance | |
| Total Direct Labor Variance |
s_2c
| Wheels of Fortune Variable Overhead Variance | |||
| Standard Variable Overhead | Actual Variable Overhead | ||
| Standard Variable Overhead per Bicycle | Actual Variable Overhead per Bicycle | ||
| Total Standard Variable Overhead | Total Actual Variable Overhead | ||
| Total Variable Overhead Variance |
| Wheels of Fortune Selling & General Admin Variance | |||
| Actual Selling & General Admistration | |||
| Actual | Selling & General Administration | ||
| Director Salaries | |||
| Total Acutal Selling & General Admin | |||
| Selling & General Admin Variances | |||
| Total Selling & General Admin Variances |
_2e
| Difference | |
| Operating Income | |
| Total Sales Mix Variance | |
| Manufacturing Variances | |
| Usage | |
| Price | |
| Efficiency | |
| Rate | |
| Spending | |
| Total Manufacturing Variances | |
| Operating Income 2021 | |
| (unfavorable) | |
| **This number needs to balance from your financials with a formula. |
| Comparative Income Statement | |
| – 0 | |
| Sales Dollars | |
| Variable Cost (at standard) | |
| Manufacturing Variances | (Unfavorable) |
| Adjusted Contribution Margin | |
| Adjusted Contribution Margin Percent | |
| Wheels of Fortune | Margin of Safety |
| Actual Sales and Selling & General Administration | |
| Total Sales | |
| Weighted Average Sales Price | Weighted Average Variable Costs |
| Sales Price per Unit | Variable Cost per Unit |
| WA Selling Price per Unit | WA Variable Cost per Unit |
| Average Sales Price per Unit | |
| Weighted Average Contribution Margin | |
| Weighted Average CM | Margin of Safety Dollars |
| Weighted Average CM per Unit | Margin of Safety as % of Sales |
| Weighted Average CM Ratio | Margin of Safety per Unit |
| Breakeven | |
| Breakeven in Sales Dollars | |
| Breakeven in Sales Units |
