Stealthily, Costs: I)ireet Labor arse! Materials'
565
P 12-7: Standard Cost Systems Consider the following two separate firms. One firm manufactures flexible packaging films for the snack. bakery. confectionery. and tobacco industries. Its manufacturing process has been quite stable for many years. with few technological innovations. Moreover. its products have a long life cycle. The other firm manufactures complex printed circuit hoards. primarily for laptop computers and cell phones. It does contract assembly for original equipment manufacturers. Its products have short life cycles and the firm itself faces rapid technological change in its manufacturing processes. Both firms have about the same cost structure: the percentage of unit manufacturing cost that is direct labor is roughly the same for both firms. as is the percentage of unit manufacturing cost that is direct materials.
Required: a. Which firm is more likely to use a standard cost system to control labor costs? Explain. b. How would you expect the two firms' compensation plans for their first-line supervisors to vary? (First-line supervisors manage production employees and are responsible for con-trolling direct labor and direct materials costs.)
P 12-8: Smythe and Yves A Sw iss firm. Smythe and Yves (S&Y). manufactures toiletries such as hand soaps. shampoo. con-ditioners. and a mouthwash that hotels purchase and place in the rooms for their guests. S&Y uses a standard cost system. One of the fragrances the company inserts in some bath and face soaps uses a particular scent. VBNO32. that has a standard price of 600 CHF (Swiss francs) per liter. S&Y purchased 15 liters of VBNO32 for 9.225 CHF. Prior to this purchase. S&Y had no VBNO32 in inventory. Immediately upon delivery of VBNO32. three jobs (#K8925. #G1342. and #R9823) were started that used VBNO32. The following table summarizes the actual and standard quantities (in liters) of VBNO32 in the three jobs:
.4c toed Standard Qtauttits Quantity
#K XXXXXXXXXX #G 134? XXXXXXXXXX #R XXXXXXXXXX
Required: a. Prepare a table that reports how the 9.225 CHF purchase cost of VBNO32 is distributed across S&Y's manufacturing accounts after VBNO32 has been used in the three jobs. b. Based on your analysis in part (o). what observations would you offer to management?
P 12-9: Healing Touch Healing Touch manufactures massage chairs with the following standard cost structure:
Standard Cost Sheet: Massage Chair
Metal tubing 6 m @ $3 $ 18.00 Leather 2 sq m (Li' $ XXXXXXXXXXPadding 3 kg @ $ XXXXXXXXXXDirect labor 4 hr @ $ XXXXXXXXXX
Total standard cost S104.00