Budgeting and ethics. Jayzee Company manufactures a variety of products in avariety of departments and evaluates departments and departmental managers bycomparing actual cost and output relative to the budget. Departmental managers helpcreate the budgets and usually provide information about input quantities for materials,labor, and overhead costs.

Kurt Jackson is the manager of the department that produces product Z.Kurthas estimated these inputs for product Z:

Input Budget Quantity per Unit of Output

Direct material 8 pounds

Direct manufacturing labor 30 minutes

Machine time 24 minutes

The department produces about 100 units of product Z each day. Kurt's departmentalways gets excellent evaluations, sometimes exceeding budgeted productionquantities. For each 100 units of product Z produced, the company uses, on average,about 48 hours of direct manufacturing labor (eight people working 6 hours each), 790pounds of material, and 39,5 machine-hours.

Top management of Jayzee Company has decided to implement budgetstandards that will challenge the workers in each department, and it has asked Kurt todesign more challenging input standards for product Z.Kurt provides top managementwith the following input quantities:

Input Budget Quantity per Unit of Output

Direct material 7.9 pounds

Direct manufacturing labor 29 minutes

Machine time 23.6 minutes

Discuss the following:

1. Are these budget standards challenging for the department that produces productZ?

2. Why do you suppose Kurt picked these particular standards?

3. What steps can Jayzee Company's top management take to make sure Kurt'sstandards really meet the goals of the firm?