The Alton Company is going to expand its punch press department. It is about to purchase three new punch presses from Equipment Manufacturers, Inc. Equipment Manufacturers' engineers report that their mechanical studies indicate that for Alton's intended use, the output rate for one press should be 1,000 pieces per hour. Alton has very similar presses now in operation. At the present time, production from these presses averages 600 pieces per hour.

A study of the Alton experience shows the average is derived from the following individual outputs.

Alton management also plans to institute a standard cost accounting system in the very near future. The company engineers are supporting a standard based upon 1,000 pieces per hour, the accounting department is arguing for 750 pieces per hour and the department foreman is arguing for 600 pieces per hour.

(a) What arguments would each proponent be likely to use to support his case?

(b) Which alternative best reconciles the needs of cost control and the motivation of improved performance? Explain why you made that choice.

Transcribed Image Text:

Worker Daily Output L. Jones 750 J. Green 750 R. Smith 600 H. Brown 500 R. Alters 550 G. Hoag 450 Total Average 3,600 600