Explain the general features of a standard cost system

Assignment Help Management Theories
Reference no: EM13877073

Standard Cost System-Behavioral Considerations Mark-Wright Inc. (MWI) is a specialty frozen food processor located in the midwestern states. Since its founding in 1982, MWI has enjoyed a loyal local clientele willing to pay premium prices for the high-quality frozen foods prepared from special recipes. In the last two years, MWI has experienced rapid sales growth in its operating region and has had many inquiries about supplying its products on a national basis. To meet this growth, MWI expanded its processing capabilities, which resulted in increased production and distribution costs. Furthermore, MWI has been encountering pricing pressure from competitors outside its nor- mal marketing region.

Because MWI desires to continue its expansion, Jim Condon, CEO, has engaged a consulting firm to assist the company in determining its best course of action. The consulting firm concluded that, although premium pricing is sustainable in some areas, MWI must make some price conces- sions if sales growth is to be achieved. Also, to maintain profit margins, the company must reduce and control its costs. The consulting firm recommended using a standard cost system that would facilitate a flexible budgeting system to better accommodate the changes in demand that can be expected when serving an expanding market area.

Jim met with his management team and explained the consulting firm's recommendations. He then assigned the team the task of establishing standard costs. After discussing the situation with their respective staffs, the management team met to review the matter.
Jane Morgan, purchasing manager, noted that meeting expanded production would necessitate obtaining basic food supplies from sources other than MWI's traditional ones. This would entail increased raw materials and shipping costs and could result in supplies of lower quality. Conse- quently, the processing department would have to make up these increased costs if current cost lev- els are to be maintained or reduced.

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 cannot 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

1. With respect to a standard cost system, list:

a. Its major advantages.

b. Its disadvantages.

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

3. Explain the general features and characteristics associated with the introduction and operation of a standard cost system that make it an effective tool for cost control.

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

Reference no: EM13877073

Questions Cloud

Calculate the resistance of the series field : Calculate the resistance of the series field. b. Calculate the motor speed which will result if the series resistance is increased from 5 O to 15 O.
Identify advantage of implementing a standard costing system : Identify the advantages of implementing a standard costing system. Explain the role of each of the following persons in developing standards: Purchasing manager.
Write an essay on the topic of greenhousegases : Write an essay about 7 pages long on the topic of GreenhouseGases based on the following pattern: What the topic is about on large
Rotor resistance and inductance : Stator resistance and rotational losses may be neglected, and the rotor resistance and inductance may be assumed to be constant, independent of rotor frequency. Determine
Explain the general features of a standard cost system : Explain the general features and characteristics associated with the introduction and operation of a standard cost system that make it an effective tool for cost control.
Voltage starting current : A balanced set of Y-connected resistors is to be connected to the slip rings in order to limit the rated-voltage starting current to 200 percent of its rated value. What resistance must be chosen for each leg of the Y connection? What will be the ..
Identify the topic as an argumentative issue : Remember that there are key components required for each discussion paragraph. Within each paragraph, you must indicate a topic you extracted from the reading selection. To begin each paragraph, identify the topic as an argumentative issue
Who are not suspected of any drug-oriented activity : What about students in Tecumsah, Oklahoma, who have volunteered to sing in the choir, and who are not suspected of any drug-oriented activity? Do they have the right to resist school drug tests? Check the Supreme Court for 2002
Derive the firm''s trace function : What is the monopolist's profit-maximizing combination of price and quantity and What is the firm's profit?

Reviews

Write a Review

Management Theories Questions & Answers

  Learning in action

Learning contract proposal that will form the basis of your learning contract report.

  Change is the only constant

"Change is the only constant " Evaluate the different types of change that have occurred in Sony.

  How do advertisers try to use group influence

How do advertisers try to use group influence?  Will you find any specific examples and explain the relevant theory of group behavior and influence?

  Case study:saving sony

You have been appointed by Sony as a consultant on change management. Advise Sony on how they could implement the change by using the various theories of change you have learnt.

  How the stock market works

The purpose of this project is to help you to gain an understanding of how the stock market works and of the relationship between theory and practice.

  Find the optimal production quantities

Find not only the optimal production quantities, but also the optimal total cost.

  Describe the management process

Describe the management process and identify the skills required to manage business organizations.

  Case study : bert''s bonsai and aquatic sport museum

Case Study : Bert's Bonsai and Aquatic Sport Museum Prepare a knowledge management system.

  Knowledge management techniques

Demonstrate understanding of the many-sided nature of knowledge management

  Theory of transtheoretical model

Demonstrate understanding of the many-sided nature of knowledge management

  Write a paper on historical trends of management

Write a paper on Historical Trends of Management.

  Theory of reasoned action

Theory of Planned Behavior and Integrated Behaviors Model

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd