Funtime Inc

dictation of Facts Fun epoch, Inc manufactures videogames political simple machines. Funtime, Inc encountered decline in profits as a result of the modernized technology. To leg the decline in profits the focal point team foc employ on manufacturing political economy and increased yield by ontogeny an inducement program for coveroff managers whose sh atomic number 18 allowed for an increase in the amount of units produced and a decrease in its greet. The occupation commandion team improved manufacturing by change magnitude the number of completed units beyond conventionality production levels.To put together the videogame machines the throng group requisite split from the printed go boards (PCH) and the training heads (RH). To achieve increased production, the split were not carefully produced which resulted in the rejection of the move that were not well-tried and modified to wreak manufacturing standards. The preventive maintenance that would abide been u sed was postponed and only emergency repair was universe carried out to keep production going.As a result of the pressure on the production group to focus on their machine in that respect was machine downtime in the PCH and RH groups along with the demand for the parts light-emitting diode to more than parts world rejected. outline Based on Funtimes saucily implemented incentive program, which rewards managers for increased outfit and greet savings, expectations were to see an increase in output and apostrophize savings. Numbers on the parcel account show how the incentive program is working thus far. It washbowl be seen in the dodge on a lower floor that the goal of change magnitude output is creation achieved as output is 200 units oer cypher.Despite the increased output, the goal of decreasing cost is failing thus far. There is an admonishing contribution marge magnetic declination to budget of $58,660. The destinys that are driving that invidious contribution margin variance are in the synopsis to a lower place. localise Materials The first divisor of the untoward contribution margin is steer tangibles. The contribution report shows that read materials has an un halcyon variance of $40,four hundred. Funtime uses three different material types to build the video game units. A closer pay heed at how high-octane the trapping units, printed lap boards, and the study heads are being used can be ound in the tables below. The first table shows the positive cost that Funtime is paying for the three types of aspire material versus what the standard rate says they should be paying. The housing units shows no variance in the midst of the actual cost and the standard cost but both the printed circuit boards and the interpret heads are both showing an untoward variance totaling $13,900. To obtain their goal of change magnitude production levels the PCB and RH groups consecrate begun rejecting parts that in the past would dupe b een tested and modified to meet standards and then be used in production.Rejecting the parts and transport in new ones is proving to increase production levels but at the same time costing Funtime $13,900 more in send off materials than they should be paying for the month of May. The run material purpose analysis gives a picture of how many materials are being used to produce the 2,200 units of output. Using the practice session table below Funtime used a total of 2,200 housing units, 4,700 printed circuit boards, and 9,200 reading heads. In the hire material usage table it is seen how those actual units compared to how many units authentically should wee-wee been used.Just like in the direct material cost table housing units had no variance but printed circuit boards and reading heads have an unfavorable variance. Its shown that 300 more printed circuit boards and 400 more reading heads were used than should have been. This is in line with previous analysis that due to the rushed production more PCBs and RHs are being purchased because of the high rejection rate. Direct Labor The next component that is assist to cause the unfavorable contribution margin is the direct projection cost.Just like in direct material there are three different types of direct parturiency at Funtime and those include assembly, printed circuit boards, and reading heads. Similar tables were used to look at the efficiency of direct dig as were used to look at direct materials. The table below shows the actual hours worked for individually group versus the standard hours that should have been worked. Its seen that for the assembly group there was no variance but the PCB and RH groups both had negative variances. Because of the pressure to increase production, snag maintenance on the machines was postponed do machines to decompose down.This in turn caused abnormal machine downtime resulting in employee idle time that required the use of overtime. This explains the unfavora ble variance in direct labor hours amongst the PCB and RH groups. With the destiny to work overtime hours Funtime will have to pay higher overtime grade. The table below shows us the actual rates paid versus the standard rates that should have been paid. As expected PCB and RH groups have an unfavorable rate variance art object Assembly has a favorable variance. This caused Funtime to pay $4,860 in direct labor cost over the standard cost.Sales The last component of the unfavorable contribution margin is the variance in sales and sales price. look back at the contribution report it is seen that despite output and sales having favorable variance revenue actually has an unfavorable variance. This can be tied straightaway to sales price per unit. The table below shows clearly that Funtime is selling their product at a subtraction and is losing money. Funtime is selling for to for each one one one unit for $20 dollars less than what was budgeted for. In May they lost $44,000 fo r selling each unit at $20 below budget.Looking strictly at units sold in the table below it can be seen that Funtime has a favorable sales mountain variance. Although they had a favorable variance, it was not replete of a favorable variance to facilitate offset the revenue they are losing by selling each unit at a discount. This analysis clearly shows there are three main components causing the unfavorable contribution margin in the month of May. A closer look at the direct material and direct labor tables shows that the PCB and RH groups are antecedent efficiency to increase production.Because of the shift in resources from testing and modifying parts to increasing production it has resulted in just rejecting the parts totally which is driving up direct labor cost. As well the shift in resources away from maintenance on the machines to increasing production has caused the machines to breakdown often. This has caused much employee downtime resulting in overtime hours being wor ked which is the main device driver in the unfavorable direct labor costs. And lastly the analysis showed that Funtime is selling each unit at a discount to what the budgeted price should have been.