Change of policy to improve productivity (CM A adapted). Brock Toy Company has been experiencing declining profit
Question:
Change of policy to improve productivity (CM A adapted). Brock Toy Company has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity.
Brock uses a standard cost system to evaluate the performance of the assembly department.
All n egative variances at the end of the month are investigated. The assembly department rarely completes the operations in less time than the standard allows
(which would result in a positive variance). Most months the variance is zero or slightly negative. Reasoning that the application of lower standard costs to the products manufactured will result in improved profit margins, the production manager had recommended that all standard times for assembly operations be drastically reduced.
The production manager has informed the assembly personnel that she expects them to meet these new standards.
Will the lowering of the standard costs (by reducing the time of the assembly operations)
result in improved profit margins and increased productivity?
Step by Step Answer:
Managerial Accounting An Introduction To Concepts Methods And Uses
ISBN: 9780030259630
7th Edition
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil, Sidney Davidson