To be able to use a standard costing system, a company must develop standards that will serve as a guide for the amount of a resource(e.g. direct material, direct labor) that should be consumed in the production of a unit. A popular way of developing these standards is to conduct a time or process study that examines the actual work of employees whose results are then used as the standard. (An industrial engineer often conducts the study). This standard serves as a benchmark which actual result will be compared to and often times used for performance evaluations.

Suppose you work for an ice packing service company and your job is to fill each plastic bag with 5 pounds of crushed ice and close the bag with a metal fastener. These bags are then delivered to local grocery stores and convenience stores for sale. Assume also you were chosen as the subject for the time study. Because some amount of spillage is normal, the study will measure the amount of ice each bag has. Your time to fill and fasten each bag will also be meausured. These numbers will then serve as company standards for everyone within the company doing your job.

1. Is there any motivation for you to intentionally spill some ice or to purposefully take longer than normal to fill and/or fasten the bag?

2. How might these standards affect employees(including you) later?

3. How might the company mitigate the problem?