Exam 10: Standard Costing,Operational Performance Measures,and the Balanced Scorecard

Manufacturing cycle time is a popular nonfinancial measure used to evaluate performance. Required: A.Cycle time is defined as processing time divided by the sum of processing,moving,waiting,and inspection time.The optimal value for this measure is one,that is,a situation where there is no waiting,moving,or inspection time. A.Define manufacturing cycle time and indicate the optimal value (i.e. ,number)for this measure. B.Provide examples of two changes in a manufacturing process that would help improve a company's cycle time. B.There are many such examples: · Inspection time can be reduced by eliminating the need to inspect materials from suppliers.This could occur by dealing with better suppliers and placing a greater reliance on the suppliers' control process. · Waiting time can be reduced through better scheduling of bottlenecked machinery. · Moving time can be reduced through improvements in plant layout.

The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

Dana,Inc.recently completed 56,000 units of a product that was expected to consume four pounds of direct material per finished unit.The standard price of the direct material was $8.50 per pound.If the firm purchased and consumed 228,000 pounds in manufacturing (cost = $1,881,000),the direct-material quantity variance would be figured as:

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

A manufacturing company is expected to complete a task in 45 minutes.During a recent accounting period,3,200 completed units were produced,resulting in the following labor variances: Labor rate variance: $520 favorable Labor efficiency variance: $2,800 unfavorable The standard labor rate is $14 per hour. Required: Calculate (1)the standard hours allowed for the work performed,(2)the actual hours worked,and (3)the actual wage rate.

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation?

Most companies base the calculation of the material price variance on the:

Consider the following information: Direct material purchased and used,80,000 gallons Standard quantity of direct material allowed for May production,76,000 gallons Actual cost of direct materials purchased and used,$176,000 Unfavorable direct-material quantity variance,$9,400 The direct-material price variance is:

Consider the following statements: I.The standard cost per unit of materials is used to calculate a materials price variance. II.The standard cost per unit of materials is used to calculate a materials quantity variance. III.The standard cost per unit of materials cannot be determined until the end of the period. Which of the above statements is (are)true?

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

A favorable labor efficiency variance is created when actual labor hours worked exceed standard hours allowed.

The direct-material quantity variance is:

Variances are computed by taking the difference between the product cost and standard cost.

Normal defect rates in an assembly process would be considered if a company desires to establish a series of practical manufacturing standards.

The following events occurred at Crescent Manufacturing (CM),an assembler of engine parts,during May: 1.Because of a stock shortage at its regular supplier,CM had to rely on a new vendor for two purchases of raw material parts.The vendor required CM to pay air-freight charges;however,upon arrival,the company found the goods to be above-average in quality. 2.The local municipality raised its property tax rates by 2%. 3.A flu outbreak on the assembly line forced management to use more experienced,senior personnel to complete production orders on a timely basis.These workers more than made up for lost time. 4.A shoddy maintenance program resulted in an abnormally high number of breakdowns on machine no.76 and slowed production. 5.The implementation of a new program had positive effects for the company with respect to material usage and worker productivity. Required: Create a table with the following headings: material price variance,material quantity variance,labor rate variance,and labor efficiency variance.Determine which of these variances would be affected by the individual events and whether the variance would be favorable or unfavorable.

When the quantity of materials purchased is not equal to the quantity of material used,most companies base the calculation of the material quantity variance on the:

A perfection standard:

Standard costs:

When using a balanced scorecard,a company's market share is typically classified as an element of the firm's:

Swedish Cruise Lines (SCL),which operates in a very competitive marketplace,is considering four categories of performance measures: (1)profitability measures,(2)customer-satisfaction measures,(3)efficiency and quality measures,and (4)learning and growth measures.The company assigns one manager to each ship in its fleet to oversee the ship's general operations.If SCL desired to adopt a balanced-scorecard approach,which measures should the firm use in the evaluation of its managers?