Setting Standards, Materials and Labor Variances Tom Belford and Tony Sorrentino own a small business devoted to kitchen and bath granite installations. Recently, building contractors have insisted on up-front bid prices for a house rather than the cost-plus system that Tom and Tony had been using. They worry because natural flaws in the granite make it impossible to tell in advance exactly how much granite will be used on a particular job. In addition, granite can be easily broken, meaning that Tom or Tony could ruin a slab and would need to start over with a new one. Sometimes the improperly cut pieces cquld be used for smaller installations, sometimes not. All their accounting is done by a local certified public accounting firm headed by Charlene Davenport. Charlene listened to their concerns and suggested that it might be time to implement tighter controls by setting up a standard costing system. Charlene reviewed the invoices pertaining to a number of Tom and Tony's previous jobs to determine the average amount of granite and glue needed per square foot. She then updated prices on both materials to reflect current conditions. The standards she developed for one square foot of counter installed were as follows: $50.00 Granite, per square foot Glue oz. $0.15) 1.50 Direct labor hours: 1.50 6.25 Cutting labor (0.10 hr. $15) Installation labor (0.25 hr. O $25) These standards assumed that one seamless counter requires one sink cut (the space into which the sink will fit) as well as cutting the counter to fit the space available Charlene tracked the actual costs incurred by Tom and Tony for granite installation for the next 6 months. She found that they completed 50 Check My Work Previous All work saved. Email Instructor Save and Exit Submit Assignment for Grading 000 000 F4 DU FB DD F5 F6 F7 F9 F10 F11 % A & * C ) - 5 Il + 6 7 8 9 0 Setting Standards, Materials and Labor Variances Tom Belford and Tony Sorrentino own a small business devoted to kitchen and bath granite installations. Recently, building contractors have insisted on up-front bid prices for a house rather than the cost-plus system that Tom and Tony had been using. They worry because natural flaws in the granite make it impossible to tell in advance exactly how much granite will be used on a particular job. In addition, granite can be easily broken, meaning that Tom or Tony could ruin a slab and would need to start over with a new one. Sometimes the improperly cut pieces cquld be used for smaller installations, sometimes not. All their accounting is done by a local certified public accounting firm headed by Charlene Davenport. Charlene listened to their concerns and suggested that it might be time to implement tighter controls by setting up a standard costing system. Charlene reviewed the invoices pertaining to a number of Tom and Tony's previous jobs to determine the average amount of granite and glue needed per square foot. She then updated prices on both materials to reflect current conditions. The standards she developed for one square foot of counter installed were as follows: $50.00 Granite, per square foot Glue oz. $0.15) 1.50 Direct labor hours: 1.50 6.25 Cutting labor (0.10 hr. $15) Installation labor (0.25 hr. O $25) These standards assumed that one seamless counter requires one sink cut (the space into which the sink will fit) as well as cutting the counter to fit the space available Charlene tracked the actual costs incurred by Tom and Tony for granite installation for the next 6 months. She found that they completed 50 Check My Work Previous All work saved. Email Instructor Save and Exit Submit Assignment for Grading 000 000 F4 DU FB DD F5 F6 F7 F9 F10 F11 % A & * C ) - 5 Il + 6 7 8 9 0
