Project Essay

614 WordsOct 7, 20153 Pages
Team Project (30-60 min.) A11-60 1. Pella will need standards that will enable them to compute: Direct materials price and efficiency variances for individual direct materials, including: – glass – wood – different types of hardware, such as door handles, and window cranks – and so on. This will require price and quantity standards for each individual type of direct materials. Direct labor rate and efficiency variances Pella will need different price and quantity standards for each different type of direct laborer — for example, skilled versus unskilled labor. Manufacturing overhead flexible budget variance Ideally, Pella should have separate standards for individual overhead items such as utilities, indirect materials, indirect labor, and depreciation on plant and equipment. However, such detailed standards may be too costly for the information they provide, so Pella may decide to combine all the overhead items into a single manufacturing overhead standard, as in the chapter. While Pella may decide to compute a manufacturing overhead production volume variance, this variance is not very helpful for controlling business operations, so Pella may decide not to compute this variance. Pella should develop non-financial standards for key factors such as quality (number of defects) and on-time delivery. 2a. Three alternative approaches to setting standards include: Engineering analysis/time-and-motion studies This approach reveals the minimum amount of direct materials, direct labor, and manufacturing overhead resources required for production. The engineers will probably suggest reorganization of plant layout or changes in the production process to increase efficiency. Pella’s own engineers or outside consultants could perform this analysis. Continuous improvement standards Pella would begin with its historical data-based standards. The company

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