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Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman
Edition 6ISBN: 9780071283700Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman
Edition 6ISBN: 9780071283700 Exercise 2
A number of companies use the following ratio to measure operating efficiency:
Earned direct labor dollars is the number of units produced times the standard direct labor dollars per hour. For example, the machine department produced four jobs today:
Actual direct labor dollars for today total $1,350.
The higher the ratio, the more output per actual direct labor dollar. Operating managers are rewarded for high ratios.
Required:
Discuss the advantages and disadvantages of using this ratio to measure and reward the performance of factory managers.
Earned direct labor dollars is the number of units produced times the standard direct labor dollars per hour. For example, the machine department produced four jobs today:
Actual direct labor dollars for today total $1,350.
The higher the ratio, the more output per actual direct labor dollar. Operating managers are rewarded for high ratios.
Required:
Discuss the advantages and disadvantages of using this ratio to measure and reward the performance of factory managers.
Explanation
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Standard cost
Standard cost is the cost...
Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman
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