1. How will the 800 extra bikes produced directly impact vaiances?
   1. There will necessarily be a price and quantity variance as a result of the 800 bicycles produced
   2. There will necessarily be a quantity variance as a result of the 800 bicycles produced
   3. There will necessarily be a price variance as a result of the 800 bicycles produced
   4. None of these choices are correct
2. Is it possible for variance to occur in fixed costs?
   1. Yes, it is possible; but only for price variance
   2. No it is not possible; there is never a variance for fixed costs
   3. Yes it is possible; but only for quantity variance
   4. Yes it is possible; for both price and quantity variance
3. Would it be possible for the 800 extra bikes to impact sales variance if more than one model of bicycle were produced?
   1. Yes, but this would most likely be a sales mix variance
   2. Yes, but this would most likely be a market share variance
   3. No, the variance would not be impacted by any number of bicycle models
   4. Yes, but this would most likely be a market size variance
4. Looking at Exhibit 1 &2 from the case, what choice is closest to the Frame Assembly Price Variance?
   1. 102,000 Unfavorable
   2. 170,100 Unfavorable
   3. 102,000 Favorable
   4. 170,100 Favorable
5. Looking at Exhibit 1 &2 from the case, what choice is closest to the Wheel Assembly Quantity Variance?
   1. 1,300 Favorable
   2. 1,300 Unfavorable
   3. 9,250 Favorable
   4. 9,259 Unfavorable

Mile High Cycles 191-056 Exhibit 1 2004 Production Budget Budget based on 10,000 bicycles production Frame assembly: Steel tubing Paint Labor $ 3,300,000 25,000 $ 1,500,000 $ 4,825,000 (110,000 lbs. @ $30.00/b.) (1,250 gals. @ $20.00/gal.) (100,000 hrs. @ $15.00/hr.) Total frame Wheel assembly Parts Labor Total wheel $ 1,200,000 65,000 $ 1,265,000 (10,000 kits @ $120.00/kit) (5,000 hrs. @ $13.00/hr.) Final assembly Parts Labor Total final assembly (10,000 kits @ $350.00/kit) (7,500 hrs. @ $14.00/hr.) 105,000 $ 3,605,000 Overhead costs: Rent Office staff Depreciation Other costs Total overhead $ 250,000 100,000 100,000 750,000 $ 1,200,000 (estimated to be 2/3 variable) Total Annual Costs $10,895,000 191-056 Mile High Cycles Exhibit 2 2004 Production Costs Actual production: 10,800 bicycles Frame assembly: Steel tubing $ 3,572,100 28,187 $ 1,528,050 $5,128,337 (113,400 lbs. @ $31.50/lb.) (1,375 gals. @ $20.50/gal.) (100,200 hrs. @ $15.25/hr.) Labor Total frame Wheel assembly: Parts Rework parts Labor 25,000 (10,800 kits @ $122.00/kit) (spokes and rims) (5,500 hrs. @ $13.50/hr.) Total wheel $1,416,850 Final assembly Parts Rework parts Labor Total final assembly $ 3,963,600 45,000 116,000 $ 4,124,600 (10,800 kits @ $367.00/kit) (miscellaneous parts) (8,000 hrs. @ $14.50/hr.) Overhead costs: Rent Office staff Depreciation Other costs Total overhead $ 250,000 100,000 100,000 850,000 $1,300,000 Total Annual Costs $11,969,787 Mile High Cycles 191-056 Exhibit 1 2004 Production Budget Budget based on 10,000 bicycles production Frame assembly: Steel tubing Paint Labor $ 3,300,000 25,000 $ 1,500,000 $ 4,825,000 (110,000 lbs. @ $30.00/b.) (1,250 gals. @ $20.00/gal.) (100,000 hrs. @ $15.00/hr.) Total frame Wheel assembly Parts Labor Total wheel $ 1,200,000 65,000 $ 1,265,000 (10,000 kits @ $120.00/kit) (5,000 hrs. @ $13.00/hr.) Final assembly Parts Labor Total final assembly (10,000 kits @ $350.00/kit) (7,500 hrs. @ $14.00/hr.) 105,000 $ 3,605,000 Overhead costs: Rent Office staff Depreciation Other costs Total overhead $ 250,000 100,000 100,000 750,000 $ 1,200,000 (estimated to be 2/3 variable) Total Annual Costs $10,895,000 191-056 Mile High Cycles Exhibit 2 2004 Production Costs Actual production: 10,800 bicycles Frame assembly: Steel tubing $ 3,572,100 28,187 $ 1,528,050 $5,128,337 (113,400 lbs. @ $31.50/lb.) (1,375 gals. @ $20.50/gal.) (100,200 hrs. @ $15.25/hr.) Labor Total frame Wheel assembly: Parts Rework parts Labor 25,000 (10,800 kits @ $122.00/kit) (spokes and rims) (5,500 hrs. @ $13.50/hr.) Total wheel $1,416,850 Final assembly Parts Rework parts Labor Total final assembly $ 3,963,600 45,000 116,000 $ 4,124,600 (10,800 kits @ $367.00/kit) (miscellaneous parts) (8,000 hrs. @ $14.50/hr.) Overhead costs: Rent Office staff Depreciation Other costs Total overhead $ 250,000 100,000 100,000 850,000 $1,300,000 Total Annual Costs $11,969,787