14-56 Journal Entries in a Standard Cost System 15-58 Four


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14-56 Journal Entries in a Standard Cost System 15-58 Four Varinace Analysis Ex 14-56 Ex 15-58.pdf Chapter 14 Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures 629 2. Assume you are the cost accountant at the manufacturing plant where the preceding scenario takes place. According to the IMA’s Statement of Ethical Professional Practice, what are your obligations in this situation? 14-56 Boron Chemical Company produces a synthetic resin that is used in the automotive industry. The company uses a standard cost system. For each gallon of output, the following direct manufacturing costs are anticipated: Journal Entries in a Standard Cost System Direct labor: 2 hours at $25.00 per hour Direct materials: 2 gallons at $10.00 per gallon $50.00 $20.00 During December of 2010, Boron produced a total of 2,500 gallons of output and incurred the following direct manufacturing costs: Direct labor: 4,900 hours worked @ an average wage rate of $19.50 per hour Direct materials: Purchased: 6,000 gallons @ $10.45 per gallon Used in production: 5,100 gallons Boron records price variances for materials at the time of purchase. Give journal entries for the following events and transactions: Purchase, on credit, of direct materials. Direct materials issued to production. Direct labor cost of units completed this period. Direct manufacturing cost (direct labor plus direct materials) of units completed and transferred to Finished Goods Inventory. 5. Sale, for $150 per gallon, of 2,000 gallons of output. (Hint: You will need two journal entries here.) Required 1. 2. 3. 4. 14-57 At a recent seminar you attended, the invited speaker was discussing some of the advantages and disadvantages of standard costs in terms of evaluating performance and motivating goal-congruent behavior on the part of employees. One criticism of standard costs in particular caught your attention: the use of conventional standard costs may not provide appropriate incentives for improvements needed to compete effectively with world-class organizations. The speaker then discussed so-called “continuous-improvement standard costs.” Such standards embody systematically lower costs over time. For example, on a monthly basis, it might be appropriate to budget a 1 percent reduction in per-unit direct labor cost. Assume that the standard wage rate into the foreseeable future is $40 per hour. Assume, too, that the budgeted labor-hour standard for October 2010 is 1.0 hour and that this standard is reduced each month by 1 percent. During December of 2010 the company produced 10,000 units of XL-10, using 9,980 direct labor hours. The actual wage rate per hour in December was $42.50. Behavioral Considerations and Continuous-Improvement Standards Required 1. Prepare a table that contains the standard labor-hour requirement per unit and standard direct labor cost per unit for the four months, October 2010 through January 2011. 2. Compute the direct labor efficiency variance for December 2010. 3. What behavioral considerations apply to the decision to use continuous-improvement standards? 14-58 Financial versus Nonfinancial Performance Indicators for Operational Control As indicated in the text, both financial and nonfinancial performance indicators play important roles in an organization’s overall operational control system. Explain, concisely, the relative advantage of each type of performance indicator. That is, what role would each type of performance indicator play in helping to ensure that operations are in control? (Hint: Think about this issue both from the standpoint of managers and from the standpoint of operating personnel.) 14-59 Standard Costs and Ethics Ohio Apple Orchards (OAO), Inc., produces an organic, super-premium apple juice that it markets to specialty food outlets. OAO purchases its apples from a select group of farmers located in the Midwest. Recently, a graduate of the

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