Case Study - Labor standards, Managerial Accounting

Assignment Help:
Case Study

Labor standards
Geeta & Company has experienced increased production costs. The primary area of concern identified by management is direct labor. The company is considering adopting a standard cost system to help control labor and other costs. Useful historical data are not available because detailed production records have not been maintained.
To establish labor standards, Geeta & Company has retained an engineering consulting firm. After a complete study of the work process, the consultants recommended a labor standard of one unit of production every 30 minutes, or 16 units per day for each worker. The consultants further advised that Geeta''s wage rates were below the prevailing rate of Rs per hour.
`Geeta''s production vice-president thought that this labor standard was too tight, and from experience with the labor force, believed that a labor standard of 40 minutes per unit or 12 units per day for each worker would be more reasonable. he president of Geeta & Company believed the standard should be set at a high level to motivate the workers and to provide adequate information for control and reasonable cost comparison. After much discussion, management decided to use a dual standard. The labor standard of one unit every 30 minutes, recommended by the consulting firm, would be employed in the plant as a motivation device, while a cost standard of 40 minutes per unit would be used in reporting. Management also concluded that the workers would not be informed of the cost standard used for reporting purposes. The production vice-president conducted several sessions prior to implementation in the plant, informing the workers of the new standard cost system and answering questions. The new standards were not related to incentive pay but were introduced when wages were increased to Rs7 per hour.
The standard cost system was implemented on January 1, 19--. At the end of six months of operation, these statistics on labor performance were presented to executive management:


January February March April May June
Production (units) 5,100 5,000 4,700 4,500 4,300 4,400
Direct labor hours 3,000 2,900 2,900 3,000 3,000 3,100
Quantity Variances:
Variance based on labor standard
(one unit each 30 minutes) Rs3150 U* Rs2,800 U Rs3,850 U Rs5,250 U Rs5,950 U Rs6,300 U
Variance based on cost standard
(one unit each 40 minutes) Rs2,800 F Rs3,033 F Rs1,633 F -0- Rs933 U Rs1,167 U



*U = Unfavorable; F = Favorable
Materials quality, labor mix, and plant facilities and conditions have not changed to a significant extent during the six month period.




1 Describe the impact of different types of standards on motivations, and specifically, the likely effect on motivation of adopting the labor standard recommended for Geeta & Company by the engineering firm.

2Please advise the company in reviewing the standards.





Related Discussions:- Case Study - Labor standards

Homework.., given the above data what would the breakeven in units and doll...

given the above data what would the breakeven in units and dollars be if u wanted a necessary after tax profit of $ 36,000 (assume a 30% tax rate ) units __________ ales dollars _

Explain short term budgets, Explain Short term budgets Short term budge...

Explain Short term budgets Short term budgets: these budgets are generally for one or two years and are in the form of monetary terms. The consumer's good industries like su

Information system project management, Hi there, i am looking an expert to ...

Hi there, i am looking an expert to make my assignments for this subject and i do have other subjects as well. Let me know how you can go through my assignment.

Explain the product life cycle costing, Product life cycle costing It i...

Product life cycle costing It is an approach used to give a long term picture of product line profitability feedback on the effectiveness of life cycle planning and cost data t

Difference between marginal costing and absorption costing, Question: A...

Question: A friend of yours is revising for his examination in management accounting and needs some help from you. He asks you the following questions. Write brief notes on eac

Working capital, State Factors determining Working Capital requirement.

State Factors determining Working Capital requirement.

The total cost accumulated in the assembly department, Kent Company had 800...

Kent Company had 800 units of product in its assembly department's work in process inventory at the starting of the period. During the period 3,000 additional units of product were

Major features of jit, Major features of JIT (1) Elimination of non-val...

Major features of JIT (1) Elimination of non-value added activity:   JIT manufacturing can be described as a philosophy of management, dedicate to the elimination of waste. Wa

What potential ethics issues, Scenario - Ahi Corporation is one of your cli...

Scenario - Ahi Corporation is one of your clients in Hawaii. The company had a good year last year and owes the IRS $100,000,000, due on March 15. There are no penalties or interes

Implementation of abc analysis, Implementation of ABC analysis The foll...

Implementation of ABC analysis The following steps are included in implementing the ABC analysis: 1. Categorize the items of inventories, establishing the expected use in un

Write Your Message!

Captcha
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