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

Order acceptance or rejection, Excess machine hours 20,000. Received offers...

Excess machine hours 20,000. Received offers from two companies to buy 210,000 units of F at 0.60 and 300,000 units of D at 0.70. Estimated costs for the two products are;

Material storage, Material storage Sophisticated mathematical models to...

Material storage Sophisticated mathematical models to control economic buying, and systems control the flow of material may all be for naught if the obvious-efficient storekeep

Open account, Open Account Credit sales are usually on open account tha...

Open Account Credit sales are usually on open account that implies which the seller ships the goods to the buyer and afterward sends the bill invoice. Consignment In th

Case Study - Labor standards, Case Study Labor standards Geet...

Case Study Labor standards Geeta & Company has experienced increased production costs. The primary area of concern identified by management is direct labor. The compa

Why is the activity based costing unaccepable for ex, Ask question #Miwhy i...

Ask question #Miwhy is the activity based costing unaccepable for external financial reportnimum 100 words accepted#

draw a timeline for the assembly department, #queComputing equivalents uni...

#queComputing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes

Cost concepts and estimations, in the past,the company had difficulties sep...

in the past,the company had difficulties separating semi-variable costs between varible and fixed costs.the company''s varible cost per unit consists of the cost of patrol,maintena

Accounting Ratios, Explain TWO limitations of using accounting ratios to as...

Explain TWO limitations of using accounting ratios to assess the performance of a firm and suggest how each limitation may be improved

Managerial accounting, Gafat Engineering Ethio plc manufactures two types o...

Gafat Engineering Ethio plc manufactures two types of TV sets LCD and CRT both having only one model. The LCD and CRT television sets sell for $9000 and $5000, respectively. the co

Define briefly about pricing decision, Pricing decision Price may be de...

Pricing decision Price may be defined as the exchange of goods or services in terms of money. Without price firm can survive in the society. If money is not there exchange of g

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