Setting Standards, Ethical Behavior Quincy Farms is a producer of items made from farm products that are distributed to supermarkets. For many years, Quincy's products have had strang regional sales an the basis of brand recognition. However, other comanies have been marketing similar products in the area, and price competition has become increasingly important. Daug Gilbert, the company's controller, is planning to implement a standard costing system for Quincy and has gathered considerable information from his coworkers production and direct materials requirements for Quincy's products. Doug believes that the use of standard custing will allow Quincy improve cost control and make better operating decisions. Quincy's most popular product is strawberry sam. The jam is produced in 10-gallon batches, and each batch requires tive quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of Imperfections in the strawberries spoilage, one quart of strawberries is discarded for every four quarts of acceptable berries. Six minutes is the standard direct labor time required for sorting strawberries in order to obtain one quart of strawbemes. The acceptable strawberries are then processed with the other ingredients: processing requires 9 minutes of direct labor time per batch. After processing, the jam is packaged in quart containers. Duug has gathered the following information from Jue Adarns, Quincy's cost accountant, relative to prucessing the strawberry jam. a. Quincy purchases strawberries at a cost of $0.0 per quart. All other ingredients coat a total of $0.41 per gallon. b. Direct labor is paid at the rate of $3.30 per hour. C. The total cost of direct material and direct labor required to package the jam is $0.31 per quart. Ice has a friend who owns a strawberry farm that has been losing money in recent years. Because of good crops, there has been an aversupply of strawberries, and prices have dropped to $0.50 per quart. Joe has arranged for Quincy to purchase strawberries from his friend's ferm in hopes that the $0.80 per quart will put his friend's farm in the black. Required: 1. Which of Doug's coworkers would probably be the least helpful to Doug in setting standards? Which of the listed factors would be the least relevant to Doug in establishing the standards for direct materials and direct labor? Foster Chark 1. Likely coworkers: operating personnel, cost accountants, and engineers. The operating personnel of each cost center should be involved in setting standards, they are the primary source for quantity information. The materials manager has information on material prices, and personnel have information about wages. The Accounting Department should be involved in standard setting and should provide information about past prices and usage. Finally, industrial engineers can provide input about absolute efficiency. In setting price standards for labor and materials, current and future market conditions and spedal contractual arrangements need to be considered. Engineering studies on efficiency and the need for proper motivation are major factors for quantity standards. 2. Develop the standard cost sheet for the prime costs of a 10-gallon batch of strawberry sam. Do not round intermediate calculations. If required, round your answers to the nearest cent. Quincy Farms Standard Cost Sheet Strawberry Jam - 10-Gallon Batch Strawberries $ 1.25 x Other Ingredients 4.7 X Sarting labor Processing labor Packaging Total standard cost
