Question

Nicki Fenty Corporation manufactures a variety of beauty products in several departments and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets and usually provide information about input quantities for materials, labor, and overhead costs.

Chante Moore is the manager of the department that produces lip gloss. Chante has estimated these inputs for Lip gloss:

Input	Budget quantity per unit output
Direct Materials	8 Pounds
Direct Manufacturing Labour	30 Minutes
Machine Time	24 Minutes

The department produces about 100 units of lip gloss each day. Chante’s department always gets excellent evaluations, sometimes exceeding budgeted production quantities. For each 100 units of lip gloss produced, the company uses, on average, about 48 hours of direct manufacturing labor (eight people working 6 hours each), 790 pounds of material, and 39.5 machine-hours.

Top management of Nicki Fenty Corporation has decided to implement budget standards that will challenge the workers in each department, and it has asked Chante to design more challenging input standards for the production of lip gloss. Chante provides top management with the following input quantities:

nput	Budget quantity per unit output
Direct Materials	7.9 Pounds
Direct Manufacturing Labour	29 Minutes
Machine Time	23.6 Minutes

3. Discuss the following:

a. Are these budget standards challenging for the department that produces lip gloss? (Use the numbers provided to support your argument) (2 marks)

b. Why do you suppose Chante picked these particular standards? (Critical thinking) (2 marks)

c. What steps can Nicki Fenty Corporation’s top management take to ensure Chante’s standards really meet the goals of the firm? Discuss this briefly, with reference to the current scenario as well as to other approaches to budget preparation. (3 marks)

Answer 1

Nicki Fenty Corporation manufactures a variety of beauty products in several departments and evaluates departments and departmental managers by comparing actual cost and output relative to the budget.

3a) Are these budget standards challenging for the department that produces Lip gloss ? Ans? No, not really. The given budget standards are not challenging for the department as the department always gets excellent evaluations, also sometimes it exceeds the budgeted pooduction in quantities. The actual average psoduction data (mentioned below) shows that the department can easily achieve the 29 targets given. budget quantity per I actual actual aty. New Input unit of output (100 units) I per unit. budget Direct material 8 pounds 790 pounds | 7.9 7.9 Direct Labour 30 minutes 48 hours 28.8 machine Time 24 minutes |39.5 hours 23.7 23.6 b) why do you suppose chante picked these particular standards? Ans:- Chante picked this particular standard as he knew that he can achieve this standard very easily.

C) What steps Can Nicki Fenty Corporation's top management take to ensure chante's standards really meet the goals of the from? Discuss this briedly, Ans. Nicki Fenty Cosporation's top management has to ensure that this specific department should work in the same manner as it is working Currently. As do now, the department is working in a situations which can easily be achieved by the department.