COMM294 - Case #7 - Lululime Clothing Ltd. - R PDF

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Course: COMM294 Instructor: Kyla Gunderson Case #8: Lululime Clothing Ltd.

Bhag turned off his computer after an afternoon of gathering data. He was scheduled to meet with his business partner, Fiona, tomorrow to review last month’s performance and he wanted to make sure he was fully prepared for the meeting. Bhag and Fiona are co-owners of Lululime Clothing Ltd. a manufacturer of T-shirts, sweatshirts, and other items such as hats, gloves, and scarves. Their approach to design is unique in that they partner with emerging artists to promote their work by printing it on their clothing. The company prides itself on the artistic nature of its products, believing it is selling more than just clothing; it is selling wearable art. The uniqueness and quality of its products has allowed it to set its sales prices at the higher end of the market. Lululime’s products are sold on the company’s website and in specialty clothing stores across the country. While sales overall have been increasing in recent years, T-shirt sales have grown the most and Lululime has needed to hire additional staff in order to produce enough T-shirts to meet demand. Last month, Lululime produced and sold 3,500 T-shirts. Bhag has summarized information related to the production of T-shirts in Exhibit I and has asked you to help him finish his analysis for his meeting tomorrow with Fiona. Bhag wants to have all the appropriate calculations done before his meeting with Fiona and also have some explanations for her for the variances and what they reveal about Lululime’s production process. Required: Help Bhag get ready for his meeting with Fiona by calculating variances and brainstorm potential reasons for the variances as well as their implications for Lululime Clothing Ltd.

Exhibit I – Information on T-shirt Production Direct Materials - Fabric Actual price per meter Standard price per meter Actual meters purchased and used Standard meter of fabric allowed per unit

$10.00 $11.00 1,100 0.3

Direct Materials - Ink Actual price per litre Standard price per litre Actual litres used and purchased Standard litres of ink allowed per unit

$3.50 $3.00 45 0.014...