User Account

All Pages

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

Explain the scope of cost accounting, Explain the Scope of cost accounting ...

Explain the Scope of cost accounting Scope of cost accounting: the scope of cost accounting is very wide and includes the following: 1 cost ascertainment: it deals with t

How the tax credit will affect price and quantity , 1. In order to boost th...

1. In order to boost the housing market throughout 2009 and into 2010, the federal government offered a tax credit to first-time home buyers and some repeat buyers.

Computation of working capital required, Computation of Working Capital Req...

Computation of Working Capital Required 1. Operating Cycle Period = M+W+F+D-C     = 101.38 +2

What are the characteristics of standard costing, Characteristics of standa...

Characteristics of standard costing 1) Flow of information : in a standard costing system cost information flows in a straight forward manner as material is requisitioned and

Illustrate the steps involved in ratio analysis, Steps involved in ratio an...

Steps involved in ratio analysis The following are the four steps involved in the ratio analysis: 1) selection of relevant data from the financial statement depending upon t

What are the objectives of the cost accounting, Objectives of the cost acco...

Objectives of the cost accounting The Objectives of the cost accounting are ascertain of costs, fixation of selling prices, proper recording and presentation of cost data to th

Accepting or rejecting the offer, given a scenario when iddle capacity is l...

given a scenario when iddle capacity is less than the special order.in this case should we accept or reject the order

Accounting for business enterprise, a)      Calculate  and  discuss  the ...

a)      Calculate  and  discuss  the  nature  and  role  of accounting  for  business enterprise.  b)      Determine and discuss  the desirable qualities  expected from the prep

Marketing decisions, Marketing refers to the promotion of products, ...

Marketing refers to the promotion of products, especially advertising and branding. But marketing includes product management, pricing, prom

Finance, using the operating cycle and any other financial management knowl...

using the operating cycle and any other financial management knowledge,discuss the applicabilty of such cycle to poultry

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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