Exercise $14-30($Algo$)$ Behavioral Considerations and Continuous$-$Improvement Standards $[$LO $14-3,14-4]$

At a recent seminar you attended, the invited speaker was discussing some of the advantages and disadvantages of standard costs in

terms of evaluating performance and motivating goal$-$congruent behavior on the part of employees. One criticism of standard costs in

particular caught your attention: The use of conventional standard costs may not provide appropriate incentives for improvements

needed to compete effectively with world$-$class organizations. The speaker then discussed so$-$called continuous$-$improvement

standard costs. Such standards embody systematically lower costs over time. For example, on a monthly basis, it might be appropriate

to budget a $1\mathrm{.}0\%$ reduction in per$-$unit direct labor cost.

Assume that the standard wage rate into the foreseeable future is $$21$ per hour. Assume, too, that the budgeted labor$-$hour standard

for October of the current year is $2\mathrm{.}60$ hours and that this standard is reduced each month by $2\%.$ During December of the current

year the company produced $7,400$ units of XL$-10,$ using $20,500$ direct labor hours. The actual wage rate per hour in December was

$$23\mathrm{.}00.$

Required:

Prepare a table that contains the standard labor$-$hour requirement per unit and standard direct labor cost per unit for the $4$ months,

October through January.

Compute the direct labor efficiency variance for December. Was this variance favorable or unfavorable?

Complete this question by entering your answers in the tabs below.

Prepare a table that contains the standard labor$-$hour requirement per unit and standard direct labor cost per unit for the $4$

months, October through January.

Note: Do not round intermediate calculations. Round your "Standard Direct Labor Cost per unit" answers to $2$ decimal places

and "Standard Labor$-$Hour Requirement per unit" answers to $5$ decimal places.

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