Case Study Labor standards, Accounting Basics

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.

Related Discussions:- Case Study Labor standards

Planning and budgeting, Consider the following 2008 data for Newark General...

Consider the following 2008 data for Newark General Hospitals (in millions of dollars Simple Budget_______Flexible Budget_ Actual Budget__ Revenue______$4.7$____4.8_____$4.5____.

Explain is curve and ad curve graph, Taxes are affected by the level of eco...

Taxes are affected by the level of economic activity: When output increases, tax revenues typically increase, when output falls, tax revenues fall. Suppose a balanced- budget amend

During the current year, During the current year, Mast Corporation expects ...

During the current year, Mast Corporation expects to produce 10,300 units and has budgeted the following: net income $350,376; variable costs $1,080,800; and fixed costs $105,000

Summary of significant accounting policies, Q. Summary of significant accou...

Q. Summary of significant accounting policies? As part of their annual reports companies comprise summaries of significant accounting policies. These policies help users in int

Accounts receivable - ar, Money payable by customers (individuals or corpor...

Money payable by customers (individuals or corporations) to the other entity in exchange for goods or services that have been given or used, but not yet paid for. Receivables typic

T Accounts, Provided services on credit to Yamato P/L $5 900. How do we ap...

Provided services on credit to Yamato P/L $5 900. How do we apply this in the t accounts

General rationale financial statements, General rationale financial stateme...

General rationale financial statements provide much of the information needed by external users of financial accounting. These financial statements are official reports providing i

Using 2012 as the base year, Using 2012 as the base year, prepare a trend a...

Using 2012 as the base year, prepare a trend anslysis for the data that follow, and tell whether the results suggest a favorable or unfavorable trend.(round to one decimal place.

Cost accounting, DEFINITION OF COST ACCOUNTING DEFINITION:  as said by ...

DEFINITION OF COST ACCOUNTING DEFINITION:  as said by the Institute of Cost and Works Accountants (ICWA), London, Cost accounting is " the method of accounting for costs from t

Money measurement concept, In accounting, only those facts that can be expr...

In accounting, only those facts that can be expressed in terms of money are recorded. When money is accepted not merely as a medium of exchange but also as a measuring rod of value

Write Your Message!

Captcha
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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd