Budgeting and governance. Delma Company manufactures a variety of products in a vari- ety of departments, and evaluates departments and departmental managers by comparing actual costs and outputs relative to their budgets. Departmental managers help create the budgets and usually provide information about input quantities for materials, labour, and overhead costs. Wert Mimble is the manager of the department that produces Product Z. Wert has estimated these inputs for Product Z:

The department produces about 100 units of Product Z each day. Wert’s department always gets excellent evaluations, sometimes exceeding budgeted production quantities. Each 100 units of Product Z uses, on average, about 32 hours of direct manufacturing labour (four people working eight hours each), 295 kg of material, and 16.5 machine hours.
Top management of Delma Company has decided to implement budget standards that will challenge the workers in each department and it has asked Wert to design more challenging input standards for Product Z. Wert provides top management with the following input quantities:

REQUIRED Discuss the following:
1. Are these challenging standards for Wert’s department?
2. Why do you suppose Wert picked these particular standards?
3. What steps can Delma Company top management take to make sure Wert’s standards really meet the goals of the firm?LO1

Transcribed Image Text:

Input Direct material Direct manufacturing labour Machine time Budget Quantity per Unit of Output 3 kilograms 20 minutes 10 minutes