/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q5SE Identifying the benefits of stan... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 23: Q5SE (page 1306)

Identifying the benefits of standard costs

Setting standards for a product may involve many employees of the company. Identify some of the employees who may be involved in setting the standard costs, and describe what their role might be in setting those standards.

Short Answer

Expert verified

Employees

Information providing

Human resources manager

Information relating to wage rates.

Production manager

Information relating to resources required.

Purchasing manager

Information relating to the cost.

Production manager and engineer

Information relating to the product and its development.

Step by step solution

01

Definition of Standard Cost

The estimated cost of any activity or product is known as the standard cost. This cost is compared against the actual cost to control the business activities.

02

Step 2:Employees and their roles regarding standards-

The human resources manager provides information regarding wage rates based on experience requirements, payroll taxes, and fringe benefits (for direct labor cost standards).

03

Employees and their roles regarding standards

The production manager provides information about the nature and the amount of resources to support activities, such as moving materials, maintaining equipment, and product inspection (for manufacturing overhead standards).

04

Employees and their roles regarding standards-

Purchasing manager provides information about the purchase costs, discounts, delivery requirements, and credit policies (for direct material cost standard).

05

Step 5:Employees and their roles regarding standards-

The production manager provides information regarding Product specifications, spoilage, and production scheduling (for direct materials efficiency standards), and engineers provide information related to the time requirements for production levels and employee experience needed (for direct labor efficiency standards).

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Calculating flexible budget variances

Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.

GRANT, INC.

Flexible Budget Performance Report (partial)

For the Month Ended April 30, 2018


ActualResults
Flexible Budget Variance
Flexible Budget

Units
9,000
(a)
9,000

Sales Revenue

\(126,000

(b)

(c)

\)108,000

Variable Costs

\(52,300

(d)

(e)

\)50,300

Contribution Margin

\(73,700

(f)

(g)

\)57,700

Fixed Costs

\(16,100

(h)

(i)

\)14,900

Operating Income

\(57,600

(j)

(k)

\)42,800

Briefly describe how journal entries differ in a standard cost system.

Preparing a flexible budget and computing standard cost variances

McKnight Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. McKnight allocates overhead based on yards of direct materials. The company鈥檚 performance report includes the following selected data:

Static Budget (1,025 recliners)

Actual Results (1,005 recliners)

Sales

(1,025 recliners * \(500 each)

\)512,500

(1,005 recliners * \(495 each)

\)497,475

Variable Manufacturing Costs:

Direct Materials

(6,150 yds. @ \(8.50/yard)

52,275

(6,300 yds. @ \)8.30/yard)

52,290

Direct Labor

(10,250 DLHr @ \(9.20/DLHr)

94,300

(9,850 DLHr @ \)9.40/DLHr)

92,590

Variable Overhead

(6,150 yds. @ \(5.10/yard)

31,365

(6,300 yds. @ \)6.50/yard)

40,950

Fixed Manufacturing Costs:

Fixed Overhead

62,730

64,730

Total Cost of Goods Sold

240,670

250,560

Gross Profit

\(271,830

\)246,915

Requirements

1. Prepare a flexible budget based on the actual number of recliners sold.

2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.

3. Have McKnight鈥檚 managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?

4. Describe how McKnight鈥檚 managers can benefit from the standard cost system.

Matching terms

Match each term to the correct definition.

Terms Definitions

a. Benchmarking

b. Efficiency variance

c. Cost variance

d. Standard

1. Measures whether the quantity of materials or laborused to make the actual number of outputs is within thestandard allowed for the number of outputs.

2. Uses standards based on best practice.

3. Measures how well the business keeps unit costs ofmaterials and labor inputs within standards.

4. A price, cost, or quantity that is expected under normalconditions.

Explain the difference between a favorable and an unfavorable variance.
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Business Operations

Read Explanation

Corporate Finance

Read Explanation

Insurance

Read Explanation

Business Case Studies

Read Explanation

Managers

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.