Is standard costing beneficial? yes or no
Why beneficial or why not beneficial? (A selection may be used
more than once.)
1. Changes happen daily.
2. Inventory is trying to be eliminated.
3. Lack of timeliness.
4. Product costs are entered into general ledger (GL) inventory
accounts at standard costs, rather than actual cost.
5. Robots will likely not have the variance that humans
would.
6. The company is using real time operating performance
metrics.
7. Unintended behavioral consequences.
8. Usefulness in budgeting.
9. Variances would be identified as soon as they occur.
Example Answers:
Scenario |
Is Standard costing beneficial? |
Why beneficial or why not beneficial? |
a. |
Yes |
4. Product costs are entered into GL inventory accounts at standard cost, rather than actual cost |
b. |
No |
2. Inventory is trying to be eliminated |
c. |
No |
6. The company is using real time operating performance metrics |
The following scenarios describe situations currently facing companies.
a. |
As the company grows, the bookkeeping for actual direct material purchases, actual payroll costs, and actual manufacturing overhead is becoming increasingly complex; the number of transactions to be recorded has significantly increased. Much time is being spent by both managers and accountants in the company recording all of the actual transaction data. |
b. |
Lean practices are being implemented throughout the organization at all levels and in all departments. One of the goals of the lean movement is to eliminate inventories if at all possible. Another goal is to strive for continuous improvement in both the time spent in the manufacturing process and the amount of materials used in the product. |
c. |
The company has started using several real-time operating performance metrics to manage operations. Examples of metrics being used include manufacturing lead time in days, manufacturing volume by day, downtime in hours, material cost by day, and several other measures. These performance metrics are available to management in a dashboard that is updated hourly. |
d. |
Management wants to design an incentive system that would pay out monthly incentives to factory workers if certain cost and time standards are achieved (or beaten). The goal of this program would be to increase employee motivation levels. |
e. |
An exercise equipment manufacturer has recently installed a robotic manufacturing system. This robotic system will be used for most of the welding, painting, assembly, and testing processes in its facility. The workers who used to do these tasks (welding, painting, assembly, and testing) will be retrained and will instead oversee various production lines rather than working directly on the products. |
f. |
The company has recently begun manufacturing a new type of computer chip. The company has very little experience with this type of product or the manufacturing process used for manufacturing the chips. Managers want to be able to have cost benchmarks so that they can judge whether the actual costs are reasonable for this product. |
g. |
A rare and expensive chemical is used in the production of the company's main product. The cost of this material fluctuates wildly on a day-to-day basis, depending on market conditions. In addition, company engineers are continually working to redesign the product to use less of this material. Small incremental decreases in the material usage are being achieved on an ongoing basis. |
Solution:
Indicate whether a standard costing system would be beneficial in that situation or not and explain why or why not. Each scenario is follows:
Is standard costing beneficial? yes or no Why beneficial or why not beneficial? (A selection may ...
For each scenario, indicate whether or not a standard costing system would be beneficial in that situation and explain why or why not. Each scenario is independent of the other scenarios. (Abbreviations used: GL = general ledger. A selection may be used more than once.) Yes or no and why? reasons listed below 1.Changes happen daily 2.inventory is trying to be eliminated 3. Lack of timeliness 4. product costs are entered into GL inventory accounts at standard cost, rather than...
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Mastery Problem: Manufacturing Cost Variance (Actual Costs Compared to Standard Costs) Manufacturing cost variances may come from material costs that are higher or lower than expected, material usage that is not what was expected, higher or lower labor costs than expected, or more or less time spent to produce an item than expected. Overhead cost and volume variances are another cause for costs to be higher or lower than what was expected. The total manufacturing variance can be broken down...
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