First Assignment: Chapter 25 10 marks out of 100
Part A: Read Chapter 25 (Standard Costs and Balanced Scorecard) from your book (Accounting-Principles, the 12th edition), and in your own words summarize this chapter covering all learning objectives. The summary should not be less than 800 words, and should not be more than 1000 words.
Part B: In your own method and words and based on the material provided in this chapter, answer the following six related questions (Do not re-write the questions in your answers, just put a reference such as A1: which means answer to Q1, and A2, A3 ….A6).
Use a Word Document to submit your assignment, at the top of the first page write your name, ID, class number, and your PSU e-mail address. Save the word file with your full name
Just rely on yourself to summarize and answer. Any doubt about the summary or the answers given means a zero score.
Q1: (a) Explain the similarities and differences between standards and budgets.
(b) Contrast the accounting for standard and budgets.
Q2: Star Industries computes variances as a basis for evaluating the performance of managers responsible for controlling costs. For several months, the labor quantity variance has been unfavorable. Briefly explain what could be causing the unfavorable labor quantity variance and indicate what type of corrective action, if any, might be taken.
Q3: In reviewing the activities of the Mixing Department for the month of June, the manager of the department notices that there was an unfavorable materials price variance for the month and there was an unfavorable materials quantity variance. Under what circumstances, if any, can the responsibility for each variance be placed on (a) the purchasing department and (b) the production department?
Q4: What are the four perspectives used in the balanced scorecard? Discuss the nature of each, and how the perspectives are linked.
Q5: Fulmar Manufacturing Co. is the manufacturer of miniature models, especially of automobiles with historical interest. The company is developing new standard costs. Patrick Webb suggests that the new standards for materials should not include any waste for liquid plastics that spill out of the molds. “After all,” he says, “we’re trying to be a world class company. When we build in waste, we tell the workers it’s okay to waste some.” Sharon Berry, another manager, disagrees. “If we don’t allow for some normal human error,” she says, “we’ll have a mighty unhappy work force. Also, I think that these kinds of perfection standards exploit the workers. I certainly wouldn’t want to be held up to perfection every day—what could I do but fail?”
The argument continued. Finally, the standards were prepared. All standards were prepared according to normal expected performance, except that for materials, an ideal standard was used. Sharon, still maintaining the unfairness of the system, refused to hold her workers accountable for materials quantity variances.
Required:
1. Are ideal standards unethical? Explain briefly.
2. Is it unethical for Sharon to refuse to support the standards? Explain.
Q6: Vincent Bassani has come to the accounting department for help in interpreting his variance report. He says that he understands that last month was not a very good one for output, but he really thought everyone put forth good effort, so he is confused about the existence of an unfavorable labor efficiency variance. He cites as an example of the workers’ effort their willingness to work extra hours to get full output, even when a whole week’s worth of production had to be scrapped. He knew that his materials costs would be higher, and that overtime would make his rate variance unfavorable, but he certainly didn’t think his workers had been inefficient.
Required:
Write a short note to Vincent explaining the probable cause of the unfavorable labor efficiency variance.
Best Wishes,