Colaw Professionals, a management consulting firm, specializes in strategic planning for financial institutions. Ken Comer and Mary Linden, partners in the firm, are assembling a new strategic planning model for use by clients. The model is designed for use on most personal computers and replaces a rather lengthy manual model currently marketed by the firm. To market the new model Ken and Mary will need to provide clients with an estimate of the number of labor hours and computer time needed to operate the model. The model is currently being test marketed at five small financial institutions. These financial institutions are listed below, along with the number of combined computer/labor hours used by each institution to run the model one time.

Any company that purchases the new model will need to purchase user manuals for the system. User manuals will be sold to clients in cases of 20, at a cost of $300 per case. One manual must be used each time the model is run because each manual includes a nonreusable computer-accessed password for operating the system. Also required are specialized computer forms that are sold only by Colaw. The specialized forms are sold in packages of 250, at a cost of $50 per package. One application of the model requires the use of 50 forms. This amount includes two forms that are generally wasted in each application due to printer alignment errors. The overall cost of the strategic planning model to clients is $12,000. Most clients will use the model four times annually.Colaw must provide its clients with estimates of ongoing costs incurred in operating the new planning model, and would like to do so in the form of standard costs.InstructionsWith the class divided into groups, answer the following.(a) What factors should be considered in setting a standard for computer/labor hours?(b) What alternatives for setting a standard for computer/labor hours might be used?(c) What standard for computer/labor hours would you select? Justify your answer.(d) Determine the standard materials cost associated with the user manuals and computer forms for each application of the strategic planningmodel.

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Computer/Labor Hours Required Financial Institutions Midland National 25 First State 45 Financial Federal 40 Pacific America 30 Lakeview National 30 Total 170 Average 34