Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

One of Hoa Sen Group subsidiary called Smart Co. manufactures security cards that restrict access to government owned buildings around the region. The standard cost

One of Hoa Sen Group subsidiary called Smart Co. manufactures security cards that restrict access to government owned buildings around the region. The standard cost for the plastic that goes into making a card is $4.2 per kg and each card uses 45g of plastic after an allowance for waste. In January 120,000 cards were produced and sold by Smart Co. and this was well above the budgeted sales of 90,000 cards

The actual cost of the plastic was $5.2 per kg and the production manager (who is responsible for all buying and production issues) was asked to explain the increase. He said World oil price increases pushes up plastic prices by 30% compared to our budget and I also decided to use a different supplier who promised better quality and increased reliability for a slightly higher price. I know we have overspent but not all the increase in plastic prices is my fault. The actual usage of plastic per card was 41g and again the production manager had an explanation. He said The world-wide standard size for security cards increased by 6% due to an change in the card reader technology, however, our new supplier provided much better quality of plastic and this helped to cut down on the waste

Smart Co. operates a just-in-time (JIT) system and hence carries very little inventory

The production manager at Smart Co is responsible for all purchasing and production issues which occur. Smart Co uses standard costing and usually, every time a design change takes place, the standard cost card is updated prior to production commencing. However, the company accountant responsible for updating the standards has been off for the last two months. Consequently, the standard cost card for the new dress has now been updated.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles Volume 1 And Volume 2

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

9th Canadian Edition

1119786649, 978-1119786641

More Books

Students also viewed these Accounting questions