PROBLEM 6: It's all about variance There's significant pricing pressure in the client's market place. To compensate, a new incentive scheme has been releasd to compensatc the team bascd on incrcase manufactured units and reducing costs. In responsc, the manufacturing unit is now pushing well over nomal levels" The assembly team puts together the parts for both the blades and the data readers. To hit the production levels, the assembly team simply rejects anything that comes through that sub-par as opposed to reworking modifying them. The team has also shifted to "emergency maintenance" only The data below emerges [3 page imit Standard cost per manufactured unit: Std Cost/Unit Total Cost System Qty Cost Materials $20 $20 Shelf 1.0 Blade $15 $30 2,0 Data Reader $10 $40 4.0 Labor $10 $20 Assembly 2.0 hrs 1.0 hrs $11 $11 Blade $12 $18 Data Reader 1.5 hrs COST PER UNIT $139 Contribution Margin report by Product Linc: Budget Actual Variance Units 2000.0 2200.0 200F $400,000 $396,000 $4,000U Revenue $180,000 $220,400 $40,000U Materials Labor $98,000 $112,260 $14,260U Total Variable Cost $278,000 $332,660 $54,660u Contribution Margin $122,000 $63,340 $58,660U Cost Detai Actual Item Qty Cost Materials Assembly (shelf) $44,000 2200.0 4700.0 $75,200 Blade $101,200 Data Reader 9200.0 Labor $31,200 Assembly 3,900 hrs $31,060 $50,000 Blade 2,400 hrs Data Reader 3,500 hrs Contribution Margin $332,660 Management Observations from plant interviews: Shelf and Blade groups adjusted to support production levels, however, both units had abnormal machine downime and required inercased overtime to keep up w/demand Overtime was charged to direct labor Managers seemed to prefer part rejection as opposed to rework Assembly team compensated by increasing production by utilizing fewer hrs (Show all your formulas and calculation) i. Calculate Dircct Materials price variancc and usagc variance ii. Calculate Direct Labor efficiency and rate variance. i. Sales price and volume variance. iv. Map out the components of the $58,660U varianee. v. What's the confliet of interest between the groups here that is driving the variances? vi. What would you recommend to align interest