Alpha company is concerned about rising labor costs in relationship to production. In response, Alpha is...

 

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Alpha company is concerned about rising labor costs in relationship to production. In response, Alpha is considering employing a standard costing system to implement better control over their labor costs. Information obtained from prior periods indicate that, on average, it takes an employee approximately 20 minutes to create 1 unit. So, each employee can create approximately 24 units per day (8 working hours per day * 3 units per hour). Given this information, Alpha's production team determines that 24 units per day per employee is a little aggressive. They determine that the more reasonable standard should be 30 minutes per unit, or 16 units per day. Alpha decides to inform employees of the more lax standard of 16 units per day per employee, but to track their ability to meet the more aggressive standard of 24 units per day per employee without informing the employees of this standard (NOTE: they have consistently met this standard in the past) without telling employees. The employee payrate is $10 per hour After 4 months of operating under the dual standard costing approach, Alpha provides the following information: Month 1 Month 4 32,000 Month 2 Month 3 Units produced 25,000 18,400 24,000 12,000 Direct Labor hours 10,000 8,000 15,000 Variance Month1 Month 2 Month 3 Month 4 $120,000 U $130,000 U 24/day standard $50,000 U $56,000 U Variance $50,000 F $24,000 F $0 $20,000 F 16/day standard U= unfavorable F = Favorable Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position? Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position? Alpha company is concerned about rising labor costs in relationship to production. In response, Alpha is considering employing a standard costing system to implement better control over their labor costs. Information obtained from prior periods indicate that, on average, it takes an employee approximately 20 minutes to create 1 unit. So, each employee can create approximately 24 units per day (8 working hours per day * 3 units per hour). Given this information, Alpha's production team determines that 24 units per day per employee is a little aggressive. They determine that the more reasonable standard should be 30 minutes per unit, or 16 units per day. Alpha decides to inform employees of the more lax standard of 16 units per day per employee, but to track their ability to meet the more aggressive standard of 24 units per day per employee without informing the employees of this standard (NOTE: they have consistently met this standard in the past) without telling employees. The employee payrate is $10 per hour After 4 months of operating under the dual standard costing approach, Alpha provides the following information: Month 1 Month 4 32,000 Month 2 Month 3 Units produced 25,000 18,400 24,000 12,000 Direct Labor hours 10,000 8,000 15,000 Variance Month1 Month 2 Month 3 Month 4 $120,000 U $130,000 U 24/day standard $50,000 U $56,000 U Variance $50,000 F $24,000 F $0 $20,000 F 16/day standard U= unfavorable F = Favorable Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position? Given the information that you have, along with the operating results for the 4 months subsequent to the implementation of the double standard costing approach, discuss your opinion (informed opinion) on which standard cost should be provided to the employee and why. How would you advise the company to proceed? Why would you take this position?

Answer rating: 100% (QA)

A standard set by the firm should be stretched standard at the same time it should be achievable s... View the full answer