Eric Dawson is a department manager at Lemhi, Inc., a manufacturing company. His department is responsible for assembling various products. Lemhi uses a standard costing system to help manage operations and evaluate its managers. In addition to his salary, Mr. Dawson has the potential to earn a bonus based on how well his department performs, and he, in turn, evaluates the workers in his department based on how well they perform their duties, based on the standard costing system.
Lemhi, Inc., has just received a contract to manufacture a new toy, called Logic-Block, for the Toys for the Imagination Company, and Mr. Dawson’s department will be responsible for its assembly. The product designers and engineers at Lemhi believe it should take the workers in Mr. Dawson’s department 23 minutes to assemble each toy. However, Mr. Dawson told his workers the standard time allowed to assemble each unit of Logic-Block is 21 minutes.
Required
a. Explain what Mr. Dawson is hoping to achieve by telling workers the time expected to assemble a toy is 21 minutes versus 23 minutes.
b. What do you think the short-term and long-term implications of this strategy are likely to be? Explain.