Question

Gordon Company produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured using setup hours. The value-added standard (SQ) for this activity is zero. On July 1, at the beginning of the fiscal year, 15 setup hours were allowed and used per batch. The standard wage rate for setup labor is $24 per setup hour. During the first quarter of the new fiscal year, the company is planning to implement a new setup method developed by Gordon's industrial engineers that is expected to reduce setup time by 50 percent. The new procedure was implemented during the first quarter and the improvement expected was realized. If required, round hours to two decimal places and costs to the nearest cent. Required: 1. What is the setup standard for setup hours and the associated expected cost at the beginning of the first quarter'? Setup standard hours per batch Expected cost per batch The kaizen standard and expected associated cost? Kaizen standard hours per batch 10:00 II Expected cost per batch 2. What is the setup standard for setup hours and the associated cost at the end of the first quarter? Setup standard hours per batch Expected cost per batch 3. What if the new procedure implemented in the first quarter only produced a 40 percent reduction in setup time instead of the expected 50 percent reduction? What would the new maintenance standard and cost be? Maintenance standard hours per batch Standard batch cost

Answer 1

Answer:
1)
Setup standard	15	hours per batch
Expected cost (15 x $ 24)	$ 360	per batch
Kaizen standard ( 15 (-) 50% )	7.5	hours per batch
Expected cost ( 7.5 x $ 24 )	$ 180	per batch

2)
Setup standard	7.5	hours per batch
Expected cost	$ 180	per batch
3)
Maintenance standard ( 15 (-) 40% )	9	hours per batch
Standard batch cost ( 9 x $ 24 )	$ 216