PrimeCare, Inc., a manufacturer of custom-designed home health care equipment, has been in business for 15 years. Last year, to better control the costs of its:products, the controller implemented a standardcosting system. Reports for tracking performance are issued monthly, and any unfavorable variances are investigated further.

The production manager complained that the standards are unrealistic, stifle motivation by concentrating only on unfavorable variances, and are out of date too quickly. He noted that his recent switch to titanium for the wheelchairs has resulted in higher material costs but decreased labor hours. The net result was no increase in the total cost to produce the wheelchair. The monthly reports continue to show an unfavorable material variance and a favorable labor variance despite indications that the workers are slowing down.

Required

a. Describe several ways that a standard-costing system strengthens management cost control.

b. Give at least two reasons to explain why a standard-costing system could negatively impact the motivation of production employees.