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# Zinc Faucets, Flower City Cartridges, Changing Standards

Changing Standards

The empirical evidence reveals that firms change their standard prices and standard quantities during the fiscal year. Most firms have the following policy, ?We set our standards before the fiscal year begins and we NEVER, NEVER change them during the year (except when we have to).?

Required:

a. Evaluate the ?never change? policy. Does it make any sense? Why would firms adopt such a policy?

b. When would you expect firms to change their standards during the fiscal year?

Zinc Faucets

The standard cost sheet calls for 80 pounds of zinc per batch of 70 faucets. Zinc has a standard price of \$5.10 per pound. One thousand pounds of zinc are purchased for \$5,530. the batches of the faucets are produced, and 840 pounds of zinc are used. There was no beginning zinc inventory. All variances are calculated as soon as possible.

Required:

Prepare a table that decomposes the total purchase price of the zinc (\$5,530) into its various components as calculated by the standard cost system.

Flower City Cartridges

Flower City Cartridges (FCC) manufactures replacement cartridges for desktop printer. FCC uses standard cost withing a job order cost system. In June, FCC purchased 18 gallons of blue ink for \$385.20 and produced the following four different cartridge jobs using the blue ink (and other inks, materials, and direct labor):

Jobs Blue Ink. Gallons Used
CJ120 4.2
HP9X2 3.9
CN417 3.8
XRX776 4.4

All four jobs have a blue ink materials standard that calls for four gallons of blue ink per job. Blue in has a standard cost of \$20 per gallon. These were the only jobs calling for blue ink in June. There was no beginning blue ink inventory on June 1.

Required:

Prepare a table that indicates the financial disposition cost of the blue ink purchased in June. (That is, account for the \$385.20 blue ink purchase.)

Great Southern Furniture

Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees alone with the small crew of Great Southern employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated cost per hour is \$22. Upon completing the job, the crew reports they had total wages of \$49,693 for 2,170 hours worked.

Required:

Write a report evaluating the performance of the crew at the Hyatt in Tampa.

Software Associates

Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs. Humphrey Catalog is a client. In preparing its bid for Humphrey, SA estimates its total labor cost for this project to be \$222,500, broken down as follows:

Budgeted hours Budgeted Wages Budgeted Cost
Partner 100 \$175 \$17,500
Associates 300 120 36,000
Analyst 1,000 40 40,000
Programmer 3,000 25 75,000
Total \$222,500

After completing the Humphrey contract, SA reports the following data.

Actual hours Actual Cost
Partner 90 \$15,750
Associate 280 35,000
Senior analyst 750 63,750
Analyst 1,400 49,000
Programmer 3,600 82,800
Total \$246,300

Required:

a. Prepare a performance report for the Humphrey Catalog project.
b. Offer a plausible explanation for SA's performance on the Humphrey project.

#### Solution Preview

P12-6:
Changing Standards

The empirical evidence reveals that firms change their standard prices and standard quantities during the fiscal year. Most firms have the following policy, "We set our standards before the fiscal year begins and we NEVER, NEVER change them during the year (except when we have to)."

Required:

a. Evaluate the "never change" policy. Does it make any sense? Why would firms adopt such a policy?

b. When would you expect firms to change their standards during the fiscal year?

P 12-11

Zinc Faucets

The standard cost sheet calls for 80 pounds of zinc per batch of 70 faucets. Zinc has a standard price of \$5.10 per pound. One thousand pounds of zinc are purchased for \$5,530. the batches of the faucets are produced, and 840 pounds of zinc are used. There was no beginning zinc inventory. All variances are calculated as soon as possible.

Required:

Prepare a table that decomposes the total purchase price of the zinc (\$5,530) into its various components ...

#### Solution Summary

Your tutorial is attached, in word, and has notes and comments to assist you.

\$2.19