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

The f–test , The F–test    The significance of the regression results...

The F–test    The significance of the regression results can be tested by using the F- statistics. The F-statistics is a ratio which compares the explained sum of squares and t

Calculate the standard cost and standard selling of product, Question 1: ...

Question 1: A company's budgeted production of Product Zebra for the month ending 30 November 2004 was 10,000 units. The fixed overheads were budgeted at Rs3,200,000. The st

Impact of Cost Structure., You are required to provide a report of approx 5...

You are required to provide a report of approx 500 words or less (excluding attachments and references), accompanied by relevant calculations, in MS Word, MS Excel and/or PDF forma

Full service recourse factoring, Full Service Recourse Factoring : In this ...

Full Service Recourse Factoring : In this kind of factoring the client has to bear the risk of default made through the debtors. There the factor had advanced funds against book de

Analysis of financial ratios, Analysis of Financial Ratios: Ratios are com...

Analysis of Financial Ratios: Ratios are computed to find out the customer's liquidity position and capability to repay debts. The computed ratios must be compared along with the

Budget, advantage and disadvantage of incremental budget

advantage and disadvantage of incremental budget

Starbucks project, 1)Prepare a three (3) year forecast of estimated future ...

1)Prepare a three (3) year forecast of estimated future cash flows for you company and give valid economic/business reasons for your projections. This means you will have a stateme

Full service non recourse, Full Service Non Recourse: in this method the b...

Full Service Non Recourse: in this method the book debts are purchased through the factor assuming 100 percent credit risk. In case of default through the debtor the whole risk is

English, accounting process or accounting cycle

accounting process or accounting cycle

Model construction, Model Construction The success of a simulation exer...

Model Construction The success of a simulation exercise is related to the predictive quality of the underlying model, so that considerable care should be taken with model const

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