edia Graphics (AMG) is a rapidly expanding company involved in the publication of teaching materials. Ralph Boston, owner and manager of AMG, has made a concentrated effort to provide a quality product at a fair price, with delivery on the promised date. Boston is finding it increasingly difficult to supervise the operations of AMG personally, and he is beginning to institute an organisational structure that will facilitate management control. One recent change made was the transfer of control over departmental operations from Boston to each departmental manager. However, the Quality Control Department still reports directly to Boston, as do the Finance and Accounting Departments. A materials manager was hired to purchase all raw materials and to oversee the material-handling (such as receiving and Page 6 of 15 storage) and record-keeping functions. The materials manager is also responsible for maintaining an adequate inventory based on planned production levels. The loss of personal control over the operations of AMG caused Boston to look for a method of evaluating performance efficiently. Dave Cress, a new management accountant, proposed the use of a standard costing system. Variances for material and labour could then be calculated and reported directly to Boston. Required: a. Assume that Associated Media Graphics is going to implement a standard costing system and establish standards for materials and labour. For each of these cost components, identify and discuss (a) Which managers should be involved in setting the standards (consider each standard separately)? (b) What types of information should be considered in establishing the standards? b. Describe the basis that should be used to assign responsibility for variances to managers or departments under a standard costing system. c. In the light of your answers to requirements i and ii, outline a revised reporting structure for AMG which will allow the company to evaluate and control manufacturing performanc