E11-26A (book/static) 15 Question Help The following scenarios describe situations currently facing companies. i (Click the icon to view the scenarios.) Requirement For each scenario, indicate whether or not a standard costing system would be beneficial in that situation and explain why or why not. Each scenario is independent of the other scenarios. (Abbreviations used: GL = general ledger. A selection may be used more than once.) Is Standard Scenario costing beneficial? Why beneficial or why not beneficial? a. b. C. As the company grows, the bookkeeping for actual direct material purchases, actual payroll costs, and actual manufacturing overhead is becoming increasingly complex; the number of transactions to be recorded has significantly increased. Much time is being spent by both managers and accountants in the company recording all of the actual transaction data. Lean practices are being implemented throughout the organization at all levels and in all departments. One of the goals of the lean movement is to eliminate inventories if at all possible. Another goal is to strive for continuous improvement in both the time spent in the manufacturing process and the amount of materials used in the product. The company has started using several real-time operating performance metrics to manage operations. Examples of metrics being used include manufacturing lead time in days, manufacturing volume by day, downtime in hours, material cost by day, and several other measures. These performance metrics are available to management in a dashboard that is updated hourly. Management wants to design an incentive system that would pay out monthly incentives to factory workers if certain cost and time standards are achieved (or beaten). The goal of this program would be to increase employee motivation levels. An exercise equipment manufacturer has recently installed a robotic manufacturing system. This robotic system will be used for most of the welding, painting, assembly, and testing processes in its facility. The workers who used to do these tasks (welding, painting, assembly, and testing) will be retrained and will instead oversee various production lines rather than working directly on the products. The company has recently begun manufacturing a new type of computer chip. The company has very little experience with this type of product or the manufacturing Is Standard costing beneficial? Scenario Why beneficial or why not beneficial? Yes Is Standard costing Scenario beneficial? Why beneficial or why not beneficial? Changes happen daily Inventory is trying to be eliminated Lack of timeliness Product costs are entered into GL inventory accounts at standard cost, rather than actual cost Robots will likely not have the variance that humans would The company is using real time operating performance metrics Unintended behavioral consequences Usefulness in budgeting Variances would be identified as soon as they occur E11-28A (similar to) Question Help GrandScapes is a manufacturer of large flower pots for urban settings. The company has these standards: (Click the icon to view the standards.) E: (Click the icon to view the actual results.) Requirements 1. Compute the direct material price variance and the direct material quantity variance 2. Who is generally responsible for each variance? 3. Interpret the variances. Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. DM price ) = variance Direct materials (resin)...................... 14 pounds per pot at a cost of $5.00 per pound Direct labor. ..2.0 hours at a cost of $13.00 per hour Standard variable manufacturing overhead rate ... $6.00 per direct labor hour Budgeted fixed manufacturing overhead ........ $25,000 Standard fixed MOH rate $13.00 per direct labor hour (DLH) GrandScapes allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of 1,000 flower pots: Direct materials . Purchased 14,900 pounds at a cost of $5.30 per pound; used 14,200 pounds to produce 1,000 pots Direct labor...... Worked 2.5 hours per flower pot (2,500 total DLH) at a cost of $12.00 per hour Actual variable manufacturing overhead .... $6.40 per direct labor hour for total actual variable manufacturing overhead of $16,000 Actual fixed manufacturing overhead ....... $24,300 Standard fixed manufacturing overhead allocated based on actual production ....... $ 26,000 Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. DM price ) = variance Actual hours Actual price Actual quantity purchased Actual quantity used Standard hours allowed Standard price Standard quantity allowed Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. DM price ) = variance Actual hours Actual price Actual quantity purchased Actual quantity used Standard hours allowed Standard price Standard quantity allowed Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or ass Notebook U). Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. DM price ) = variance ix X Actual hours Actual price Actual quantity purchased Actual quantity used Standard hours allowed Standard price Standard quantity allowed Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. DM price ) = variance Actual hours Actual price Actual quantity purchased Actual quantity used Standard hours allowed Standard price Standard quantity allowed Requirement 1. Compute the direct material price variance and the direct material quantity variance. (Enter the variances as positive numbers. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U), Abbreviations used: DM = Direct materials) First determine the formula for the price variance, then compute the price variance for direct materials. ) = DM price variance CT