Hospitality Furniture, Inc. (HFI)

HFI sells bedroom furniture to hotel chains, including beds, nightstands, television tables, desks and chests of drawers. Hotel room furniture is often exposed to hard use and often must be replaced every five years. One of the issues HFI experienced with this type of furniture was that boxed, fully assembled items often get damaged in shipment.

HFI tried to solve that problem by shipping the furniture in flat, padded boxes, but that required hotels to assemble the furniture on receipt. Doing this saved money on shipping costs and reduced damage (as hoped). However, HFI found that hotels seldom have employees skilled in furniture assembly. Much to its dismay, HFI found that almost as much damage occurred during assembly as had occurred in shipment of fully assembled furniture.

After thinking things through, HFI's senior operations manager, Greta Guru, decided to try a variation on the original plan. She now ships flat-packed furniture pieces to the hotel and then sends an HFI assembly lead crew to the customer's site. The lead crew hires additional local employees and trains them to help assemble the furniture. The locally hired employees work with the HFI assemblers to build the furniture in place (in each room) at the hotel.

In a test of this new plan, Greta sent out a trained lead crew to a new customer, Daze Inns. Daze Inns was opening a 500-room addition to their existing hotel property in Winslow, Arizona. Each of the new rooms in the addition got a new HFI Desert Dreamer (DD) bedroom set.

Greta and the HFI engineering, design, and cost accounting team established standards (based on earlier bedroom set models) for direct labor costs on the new DD bedroom set, including a quantity standard of 4.5 assembly hours per set and a rate standard of $22 per assembly hour.

After the Daze Inns delivery and assembly job was completed, Ampzilla Forkwort, HFI's top cost accountant, reported that the DD assembly job cost report showed, in part, the following: Total assembly labor cost of $49,693 and 2,170 assembly labor hours worked.

Required

Assume you are an intern working for Greta and clear, concise, well-organized, and properly written report (single-spaced, left-justified text submitted as a Microsoft Word document; that is, a .doc or .docx format) in which you evaluate the assembly operation's performance on the Daze Inns job.

Rubric

• Choose and calculate correctly any applicable standard cost variances that are relevant to the assembly operation's performance.
• Provide a clear interpretation for Greta of the meaning(s) of any standard cost variance(s) you calculate.
• Use the facts stated in the case along with the results of your calculations and any logical arguments you believe are necessary to assess the performance of the team in terms that Greta will likely understand and can use to evaluate the crew's performance on this job and draw inferences about how well this new approach to delivery/assembly will likely work on future jobs.