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1.Setting standards for a product may involve many employees of the company. Identify some of the employees who may ne involved in setting the standard costs and describe what their role might be in setting those standards.

2.SMithson, Inc. is a manufacturer of lead crystal glasses. The standard materials quantity is 0.9 pound per glass at a price $0.45 per pound. The actual results for the production of 7,100 glasses were 1.3 pound per glass at a price of $0.55 per pound. Calculate the materials price variance and the materials efficiency variance.

3.The standard direct labor time is 1/4 hour per glass, at a price of $15.00 per hour. The actual results for the production of 6,800 glasses were 1/3 per glass, at a price of $14.00 per hour. Calculate the labor price variance and the labor efficiency variance.

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anthougo

1. The employees involved in setting the standard costs in a manufacturing company include the following managers:

  • Production manager
  • Sales manager
  • Purchasing manager
  • Quality control manager
  • Cost accounting manager
  • HR manager.

Who are the employees involved in setting standard costs?

1. a) The above managers play different roles in setting the standard costs.  For example, the sales manager knows much about the market price, which determines the other variables in the production and support activities.

The standard costs cannot be set without the input of the production manager, who determines the standard production time and quantity of raw materials, in addition to influencing the overhead costs.

The purchasing manager determines the purchase cost of raw materials and how to minimize it by sourcing quality materials from suppliers.

The quality manager will also play a role by determining how efficiently production activities could be carried out without increasing costs.

The cost accounting manager is responsible for gathering the cost data and determining the standard costs.

The HR manager fixes the labor rates and time and controls the efficiency of production workers.

2. The materials price variance is  $923 Unfavorable (1.3 x 7,100) x ($0.45 - $0.55) and the materials efficiency variance is $1,278 Unfavorable (0.9 - 1.3 x 7,100) x $0.45.

3. The labor price variance is $6,238 Unfavorable (2,267 x $14) - ($15 x 1,700)  and the labor efficiency variance is $8,505 Unfavorable (2,267 - 1,700) x $15.

Data and Calculations:

Standard materials quantity per glass = 0.9 pounds

Standard price per pound = $0.45

Actual production units = 7,100 glasses

Actual materials usage quantity per glass = 1.3 pounds

Actual price per pound = $0.55

Standard labor time per glass = 1/4 hours

Standard labor rate per labor-hour = $15

Actual production units = 6,800 glasses

Actual labor time per glass = 1/3 hours

Actual labor rate per labor-hour = $14

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