Milton Professionals, a management consulting firm, specializes in strategic planning for financial institutions. James Hahn and Sara
Question:
Computer/Labor Hours
Financial Institutions .....Required
Midland National ........25
First State ...........45
Financial Federal ........40
Pacifi c America .........30
Lakeview National ........30
Total ............. 170
Average ..........34
Any company that purchases the new model will need to purchase user manuals for the system. User manuals will be sold to clients in cases of 20, at a cost of $320 per case. One manual must be used each time the model is run because each manual includes a non-reusable computer accessed password for operating the system. Also required are specialized computer forms that are sold only by Milton. The specialized forms are sold in packages of 250, at a cost of $60 per package. One application of the model requires the use of 50 forms. This amount includes two forms that are generally wasted in each application due to printer alignment errors. The overall cost of the strategic planning model to clients is $12,000. Most clients will use the model four times annually.
Milton must provide its clients with estimates of ongoing costs incurred in operating the new planning model, and would like to do so in the form of standard costs.
Instructions
With the class divided into groups, answer the following.
(a) What factors should be considered in setting a standard for computer/labor hours?
(b) What alternatives for setting a standard for computer/labor hours might be used?
(c) What standard for computer/labor hours would you select? Justify your answer.
(d) Determine the standard materials cost associated with the user manuals and computer forms for each application of the strategic planning model.
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Related Book For
Accounting Principles
ISBN: 9781118566671
11th Edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
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