Springfield Inc. is a large manufacturer of kitchen cabinets, sold to builders. The company uses a standard cost system. Standard production costs have been developed for each type of cabinet; these costs, and any cost variances, are charged to the production department. A budget also has been developed for the sales department. The sales department is credited with the gross profit on sales and is charged with selling expenses and any variations between budgeted and actual selling prices.

In early May, the manager of the sales department asked the production department to fill a rush order of cabinets for a tract of 130 homes. The sales manager stated that the entire order must be completed by June 30. The manager of the production department argued that an order of this size would take 12 weeks to produce. The sales manager answered, "The customer need it on June 30, or we don't get the business. Do you want to be responsible for our losing a customer who makes orders of this size?"

Of course, the production manager did not want to take that responsibility. Therefore, he gave in and processed the rush order by having production personnel work overtime through May and June. As a result of the overtime, the performance reports for the production department in those months showed large, unfavorable labor rate variances. The production manager, who in the past has prided himself on coming in under budget, now has very ill feelings toward the sales manager. He also has stated that the production department will never accept a rush order again.

Required:

Identify any problem that you see in the company's standard cost system or in the manner in which cost variances are assigned to the responsible manager.

Make recommendations for changing the cost accounting system to reduce or eliminate any problems that you have identified