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How would the company go about setting standards for this product? . Standards for lever action rifles would be criteria that ensure the quality, safety,
How would the company go about setting standards for this product? . Standards for lever action rifles would be criteria that ensure the quality, safety, efficiency and consistency of the rifle What types of standards would be included: Quality would be type of wood used on the stock, that it was assembled correctly Safety would be that it fires correctly and operates as designed . Efficiency would be how its manufactured and is the process a smooth and easy one . Consistency is that are rifles are the same visually and operationally How would managers of the company use the standard costs: . Managers would use standard costs to determine production expenses. They would estimate how many rifles they expect to sell within a given period and then make decisions based on that, such as how much raw material is needed. How many stocks or levers their third party will produce for them. They could also estimate expected profit from the standard cost Assume the company reported the following variances in the most recent period. Can you think of a scenario that would explain each combination of variances? . Unfavorable direct materials price variance - If the actual cost for material was more than expected it could be due to supply chain shortages. . favorable direct materials usage variance- if the quality of material is better than expected than that will result in a nicer higher quality rifle. . unfavorable direct materials spending variance- this could happen if the steel used in the barrel or lever actions was of poor quality. . Favorable direct labor rate variance- would result in a higher profit due to the lower than standard wage rate. . unfavorable direct labor efficiency variance- If the hours worked are higher than that will start impacting the manufacturing cost of the rifles and impact the profits. . unfavorable direct labor spending variance - Unfavorable spending variance will again impact the production cost
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