1. What are the three primary reasons of using a standardcost system? In a business that routinely manufactures thesame products or performs the same services, why arestandards helpful?2. What are ideal standards? What are currently attainablestandards? Explain which standard is usually adopted andwhy.3. Some people suggest that the direct labor rate variance isnever controllable. Do you agree or disagree? Givereasons to support your answer.

Answered: 1. What are the three primary reasons…

1. What are the three primary reasons of using a standard cost system? In a business that routinely manufactures the same products or performs the same services, why are standards helpful?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 16MC: When is the direct labor time variance favorable? A. when the actual quantity used is greater than...

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Acme Inc. has the following information available: A. Compute the material price and quantity, and the labor rate and efficiency variances. B. Describe the possible causes for this combination of favorable and unfavorable variances.
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Refer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for materials into a price variance and a usage variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION Suppose the Boise plant manager investigates the materials variances and is told by the purchasing manager that a cheaper source of leather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased, the purchasing manager suggests that the materials price standard be updated to reflect this new, less expensive source of leather strips. Should the plant manager update the materials price standard as suggested? Why or why not?
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Refer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?
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