Alpha company is concerned about rising labor costs in relationship to production. In response, Alpha is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Alpha company is concerned about rising labor costs in relationship to production. In response, Alpha is considering employing a standard costing system to implement better control over their labor costs. Information obtained from prior periods indicate that, on average, it takes an employee approximately 20 minutes to create 1 unit. So, each employee can create approximately 24 units per day (8 working hours per day * 3 units per hour). Given this information, Alpha's production team determines that 24 units per day per employee is a little aggressive. They determine that the more reasonable standard should be 30 minutes per unit, or 16 units per day. Alpha decides to inform employees of the more lax standard of 16 units per day per employee, but to track their ability to meet the more aggressive standard of 24 units per day per employee without informing the employees of this standard (NOTE: they have consistently met this standard in the past) without telling employees. The employee payrate is $10 per hour After 4 months of operating under the dual standard costing approach, Alpha provides the following information: Month 1 Month 4 32,000 Month 2 Month 3 Units produced 25,000 18,400 24,000 12,000 Direct Labor hours 10,000 8,000 15,000 Variance Month1 Month 2 Month 3 Month 4 $120,000 U $130,000 U 24/day standard $50,000 U $56,000 U Variance $50,000 F $24,000 F $0 $20,000 F 16/day standard U= unfavorable F = Favorable Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position? Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position? Alpha company is concerned about rising labor costs in relationship to production. In response, Alpha is considering employing a standard costing system to implement better control over their labor costs. Information obtained from prior periods indicate that, on average, it takes an employee approximately 20 minutes to create 1 unit. So, each employee can create approximately 24 units per day (8 working hours per day * 3 units per hour). Given this information, Alpha's production team determines that 24 units per day per employee is a little aggressive. They determine that the more reasonable standard should be 30 minutes per unit, or 16 units per day. Alpha decides to inform employees of the more lax standard of 16 units per day per employee, but to track their ability to meet the more aggressive standard of 24 units per day per employee without informing the employees of this standard (NOTE: they have consistently met this standard in the past) without telling employees. The employee payrate is $10 per hour After 4 months of operating under the dual standard costing approach, Alpha provides the following information: Month 1 Month 4 32,000 Month 2 Month 3 Units produced 25,000 18,400 24,000 12,000 Direct Labor hours 10,000 8,000 15,000 Variance Month1 Month 2 Month 3 Month 4 $120,000 U $130,000 U 24/day standard $50,000 U $56,000 U Variance $50,000 F $24,000 F $0 $20,000 F 16/day standard U= unfavorable F = Favorable Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position? Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position?
Expert Answer:
Answer rating: 100% (QA)
A standard set by the firm should be stretched standard at the same time it should be achievable s... View the full answer
Posted Date:
Students also viewed these accounting questions
-
A production analyst has found that on average it takes a new person T(x)minutes to perform a particular assembly operation after x performances of the operation, where T(x)=10 - 10- 3x 0 125. (A)...
-
The Sussiny Corporation uses a standard costing system in its process cost facility, which manufactures a product called Wikum. Material A is added at the beginning of the process and Material B is...
-
The Quality Cabinet Company uses a standard costing system and produced 2,000 cabinets during May. The standard cost of wood is $22 per linear foot, and the standard quantity for each cabinet is 27...
-
Draw a standard normal probability function and show the area under the curve for (a) Plus or minus one standard deviation from the mean (b) Plus or minus two standard deviations from the mean (c)...
-
What is the difference between a Gantt chart and PERT?
-
Peak sales for Midwest Products, a wholesale distributor of leaf rakes, occur in August. The companys sales budget for the third quarter showing these peak sales is given below: From past experience,...
-
Evans \& Sons, Inc., has 20,000 shares of \(\$ 100\) par value, six percent preferred stock and 100,000 shares of \(\$ 1.00\) par value common stock outstanding. The preferred stock is convertible...
-
a. Ash decides to allocate $4 million to fund the exhibit. Given the pieces available and the specific requirements from Ash and Celeste, formulate and solve a binary integer programming problem to...
-
74. Which is a characteristic of the trimmed mean as a measure of center? A.It is similar to the mean if there are offsetting high and low extremes. B.It is especially helpful in a small sample. C.It...
-
Daniel Fowler, senior vintner at Napa Winery, had been put in charge of developing an optimal blending plan for the upcoming season. This assignment was the result of a recent Napa Winery board...
-
In 2021, Ralph is age 29 and has a TFSA account with his Credit Union and he also has a TFSA account with Big Bank. He has provided you with an overview of his transactions. Credit Union Big Bank...
-
5. Consider a patient whose treatment with heparin is being halted, so that only metabolism is affecting their heparin levels. The patient currently has a level of 12 mg of heparin in their system,...
-
hePrescott Company is assessing its labor costs for the past fiscal year.During the fiscal year, Prescott reported the following information: Standard Hours10,000 Actual Hours12,000 Standard wages...
-
1.Almezxea, Ltd. is estimating its cost of equity for a new metal extractor. The CFO suggested using the capital asset pricing model. The project's cash flows are being estimated for the next five...
-
The current spot rate is USD 1.00 / EUR and the 6-month forward is USD 1.20 /EUR. You go long (you will purchase) EUR 1,000 forward. At maturity, the spot exchange rates is USD 1.10 / EUR. How much...
-
Skysong Inc. presented the following data. Net income $2,470,000 Preferred stock:52,000shares outstanding, $100 par,8% cumulative, not convertible 5,200,000 Common stock: Shares outstanding 1/1...
-
x1 = Carbon amount (% weight) x2 = Manganese amount (% weight) x3 = Chromium amount (% weight) x4 = Nickel amount (% weight) x5 = Molybdenum amount (% weight) x6 = Copper amount (% weight) x7 =...
-
Imagine that your best friend knows you are taking a psychology course and wonders what psychology is all about. How would you define psychology for your friend? Write an essay on the discipline of...
-
Oligopolies exist when only a(n) _________ firms control all or most of the production and sale of a product.
-
What is a Nash equilibrium?
-
How does a tit-for-tat strategy work?
Study smarter with the SolutionInn App