Solutions Chapter 10
CHAPTER 10
Standard Costing and Performance Measures for Today’s Manufacturing Environment
ANSWERS TO REVIEW QUESTIONS
10-1 Management by exception is a managerial technique in which only significant deviations from expected performance are investigated.
10-2 Any control system has three basic parts: a predetermined or standard performance level, a measure of actual performance, and a comparison between standard and actual performance. The system works by making the comparison between actual and standard performance and then taking action to bring about a desired consequence.
10-3 One method of setting standards is the analysis of historical data. Historical cost data provide an indicator of future costs. The methods for analyzing cost behavior described in Chapter 7 are used to predict future costs on the basis of historical costs. These predictions then form the basis for setting standards. Another method for setting standards is task analysis, which is the analysis of a production process to determine what it should cost to produce a product or service. The emphasis shifts from what the product did cost in the past to what it should cost in the future. An example of task analysis is a time-and-motion study conducted to determine how long each step performed by direct laborers should require.
10-4 A perfection (or ideal) standard is the cost expected under perfect or ideal operating conditions. A practical (or attainable) standard is the cost expected under normal operating conditions. Many behavioral scientists question the effectiveness of perfection standards. They feel that employees are more likely to perform well when they strive to achieve an attainable standard than when they strive, often unsuccessfully, to achieve a perfection standard.
10-5 A bank could use standards to specify the required amount of time to process a loan application or process a bank transaction.
10-6 Standard material prices include the purchase
Standard Costing and Performance Measures for Today’s Manufacturing Environment
ANSWERS TO REVIEW QUESTIONS
10-1 Management by exception is a managerial technique in which only significant deviations from expected performance are investigated.
10-2 Any control system has three basic parts: a predetermined or standard performance level, a measure of actual performance, and a comparison between standard and actual performance. The system works by making the comparison between actual and standard performance and then taking action to bring about a desired consequence.
10-3 One method of setting standards is the analysis of historical data. Historical cost data provide an indicator of future costs. The methods for analyzing cost behavior described in Chapter 7 are used to predict future costs on the basis of historical costs. These predictions then form the basis for setting standards. Another method for setting standards is task analysis, which is the analysis of a production process to determine what it should cost to produce a product or service. The emphasis shifts from what the product did cost in the past to what it should cost in the future. An example of task analysis is a time-and-motion study conducted to determine how long each step performed by direct laborers should require.
10-4 A perfection (or ideal) standard is the cost expected under perfect or ideal operating conditions. A practical (or attainable) standard is the cost expected under normal operating conditions. Many behavioral scientists question the effectiveness of perfection standards. They feel that employees are more likely to perform well when they strive to achieve an attainable standard than when they strive, often unsuccessfully, to achieve a perfection standard.
10-5 A bank could use standards to specify the required amount of time to process a loan application or process a bank transaction.
10-6 Standard material prices include the purchase