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Sun Boat: Case Study

1. The direct cost and overhead variances at the molding department were caused by higher actual usage of materials than standard and higher actual labor hours for molding than standard. 2. The standards could be improved to incorporate more realistic non-ideal situations like low quality materials, slower processes, labor skill and rate issues, and procurement mismanagement that can lead to variances. 3. If 430 boats were sold at a standard production cost of $914.33 per boat other than molding, and actual and standard molding costs were as calculated, then the budgeted gross margin was higher than the actual gross margin for the month.

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74 views9 pages

Sun Boat: Case Study

1. The direct cost and overhead variances at the molding department were caused by higher actual usage of materials than standard and higher actual labor hours for molding than standard. 2. The standards could be improved to incorporate more realistic non-ideal situations like low quality materials, slower processes, labor skill and rate issues, and procurement mismanagement that can lead to variances. 3. If 430 boats were sold at a standard production cost of $914.33 per boat other than molding, and actual and standard molding costs were as calculated, then the budgeted gross margin was higher than the actual gross margin for the month.

Uploaded by

vinagoya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Sun Boat

Case Study
Group 1 Oakwood

M. Arief Budiman, Denny Galant, Djohan Nurjadi, Iman M. Ginanjar,


Indah Maryani, Yohanna Astrida Gumelar

12th Dec 2015


New Hampshire – Many lakes
Overview:
Sailboat in New Hampshire
The boat market in the US:
Growing Opportunity

Large untapped territory & segment


Case Background
Product:
Product: Recreational
Recreational Sail
Sail Boat
Boat 11
11 foot
foot Standard Cost
Material Glass cloth 120 sqft 2 240
Long
Long term
term plan:
plan:
Glass mix 40 lbs 3.75 150
••More
More sizes:
sizes: 15
15 &
& 18
18 ftft
Direct labor Mixing 0.5 hr 20.25 10.12
••More
More Styles,
Styles, more
more segment
segment to
to serve
serve Molding 1.0 hr 20.25 20.25
Manufacturing
Manufacturing Process:
Process: Indirect cost Absorb 24.30 per hull 24.3

••Molding, Total cost to 444.67


Molding, Finishing,
Finishing, Assembly
Assembly
mold hull
Required
Required special
special expertise
expertise
Actual Cost
Purchased Glasscloth 60,000 sq 1.80
Analysis
Analysis of
of Operations
Operations Glassmix 20,000 lbs 4.09

Used 54,000 sq glasscloth


For
For 430
430 hulls
hulls assumption
assumption found
found
significant
significant gap
gap of
of variances.
variances. 19,000 lbs glassmix
Automation
Automation in
in discussion.
discussion. DL Mixing 210 hrs 21.37
Molding 480 hrs 20.25
OH Incurred 11,140 $
Case for Analysis:
1. What caused the direct cost variance and overhead variance
at moldings department
2. Whether the standards are useful and how to improve them
3. Statement of budgeted and actual gross margin for the
month for sales of 450 boats, if actual and standard
production cost other than molding hull = $914.33 per boat
& 430 boats were sold.
Case Answer – Calculation
Led to Final Negative Variances
Case Answer (2)
Conclusion
 Possible causes of variances here are:
 Poor Procurement
Although glass cloth material price variance are “positive” [actual is cheaper than
standard] but it seems it led to negative usage variance. At the end it led to higher actual
usage than standard. It may caused by low quality glass cloth.  Procurement
department is responsible here. It might also caused by defect material.

 Poor Labor Hiring Management


On mixing, using higher skill or more expensive than planned. It result in negative
variance for labor rate but positive in efficiency since they are at higher skill.
On molding, it appears they using lower rate of labor. As result, efficiency dropped. It
took longer than standard and resulted in negative variance.

 Are the standard set here useful and how to improve them
 The standard here does not incorporate realistic situation where non-ideal situation
happened: i.e. low quality or defect materials found, slow down in process, lower than
required skill labor, increased rate labor, even mismanagement in requirement,
procurement also can led to variance observed.

 Manager must able to look on overall process and balance the variances.

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