Alan Chen, processing manager, countered that the need to accelerate processing cycles to increase

production, coupled with the possibility of receiving lower$-$grade supplies, could result in a slip in

quality and a higher product rejection rate. Under these circumstances, per$-$unit labor utilization can$-$

not be maintained or reduced, and forecasting future unit labor content becomes very difficult.

Tina Lopez, production engineer, advised that failure to properly maintain and thoroughly clean

the equipment at prescribed daily intervals could affect the quality and unique taste of the frozen

food products. Jack Reid, vice president of sales, stated that if quality could not be maintained, MWI

could not expect to increase sales to the levels projected.

When the management team reported these problems to Jim, he said that if agreement could not

be reached on appropriate standards, he would arrange to have the consulting firm set the standards,

and everyone would have to live with the results.

Required

With respect to a standard cost system, list:

a$.$ Its major advantages.

b$.$ Its major disadvantages.

Identify those who should participate in setting standards, and describe the benefits of their participation.

Explain the general features and characteristics associated with the introduction and operation of a stan$-$

dard cost system that make it an effective tool for cost control.

What could the consequences be if Jim Condon, CEO, has the outside consulting firm set MWI's

standards?