问答题
3.Bokco is a manufacturing company. It has a small permanent workforce but it is also reliant on temporary workers,whom it hires on three-month contracts whenever production requirements increase. All buying of materials is the responsibility of the company’s purchasing department and the company’s policy is to hold low levels of raw materialsin order to minimise inventory holding costs. Bokco uses cost plus pricing to set the selling prices for its products oncean initial cost card has been drawn up. Prices are then reviewed on a quarterly basis. Detailed variance reports areproduced each month for sales, material costs and labour costs. Departmental managers are then paid a monthlybonus depending on the performance of their department.
One month ago, Bokco began production of a new product. The standard cost card for one unit was drawn up toinclude a cost of $84 for labour, based on seven hours of labour at $12 per hour. Actual output of the product duringthe first month of production was 460 units and the actual time taken to manufacture the product totalled 1,860hours at a total cost of $26,040.
After being presented with some initial variance calculations, the production manager has realised that the standardtime per unit of seven hours was the time taken to produce the first unit and that a learning rate of 90% should havebeen anticipated for the first 1,000 units of production. He has consequently been criticised by other departmentalmanagers who have said that, ‘He has no idea of all the problems this has caused.
Required:
问答题
(a)Calculate the labour efficiency planning variance and the labour efficiency operational variance AFTER taking account of the learning effect.
Note: The learning index for a 90% learning curve is –0·1520 (5 marks)
【正确答案】Planning and operational variances
Revised hours for actual production:
Cumulative time per hour for 460 units is calculated by using the learning curve formula: Y = axb
a = 7
x = 460
b = –0.1520
Therefore y = 7 x 460–0·1520= 2·7565054
Therefore revised time for 460 units = 1,268 hours.
Labour efficiency planning variance
(Standard hours for actual production –revised hours for actual production) x std rate = ([460 x 7] – 1,268) x $12 = $23,424F
Labour efficiency operational variance
(Revised hours for actual production – actual hours for actual production) x std rate
(1,268 –1,860) x $12 = $7,104A
【答案解析】
问答题
(b)Discuss the likely consequences arising from the production manager’s failure to take into account the learning effect before production commenced.(5 marks)
【正确答案】Consequences of failure to anticipate learning effect
The likely consequences are as follows:
–Bokco will have hired too many temporary staff because of the fact that the new product can actually be produced morequickly than originally thought. Given that these staff are hired on three-month contracts, Bokco will presumably haveto pay the staff for the full three months even if all of them are not needed. This will be a significant and unnecessarycost to the business.
–Since production is actually happening more quickly than anticipated, the company may well have run out of rawmaterials, leading to a stop in production. Idle time is a waste of resources and costs money.
–If there have been stockouts, the buying department may have incurred additional costs for expedited deliveries or mayhave been forced to use more expensive suppliers. This would have made the material price variance adverse andnegatively affected the buying department’s manager bonus, which would have a demotivational effect on him.
–Since Bokco uses cost plus pricing for its products, the price for the product will have been set too high. This meansthat sales volumes may well have been lower than they otherwise might have been, leading to lost revenue for thecompany and maybe even failure of the new product launch altogether. This will continue to be the case for the nexttwo months unless the price review is moved forward.
–The sales manager will be held responsible for the poorer sales of the product, which will probably be reflected in anadverse sales volume variance. This means that he may lose his bonus through no fault of his own. This will have ademotivational effect on him.
Note: Other valid points could be made too.