Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 43P
Quincy Farms produces items made from local farm products that are distributed to supermarkets. For many years, Quincy’s products have had strong regional sales on the basis of brand recognition: however, other companies have begun marketing similar products in the area, and price competition has become increasingly important. Doug Gilbert, the company’s controller, is planning to implement a standard cost system for Quincy and has gathered considerable information from his co-workers on production and material requirements for Quincy’s products. Gilbert believes that the use of
Quincy’s most popular product is strawberry jam. The jam is produced in 10-gallon batches, and each batch requires six quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and normal spoilage, one quart of berries is discarded for every four quarts of acceptable berries. Three minutes is the standard direct-labor time for sorting required to obtain one quart of acceptable strawberries. The acceptable strawberries are then blended with the other ingredients. Blending requires 12 minutes of direct-labor time per batch. After blending, the jam is packaged in quart containers. Gilbert has gathered the following information from Joe Adams, Quincy’s cost accountant.
- Quincy purchases strawberries at a cost of $.80 per quart. All other ingredients cost a total of $.45 per gallon.
- Direct labor is paid at the rate of $9.00 per hour.
- The total cost of material and labor required to package the jam is $.38 per quart.
Adams has a friend who owns a strawberry farm that has been losing money in recent years. Because of good crops, there has been an oversupply of strawberries, and prices have dropped to $.50 per quart. Adams has arranged for Quincy to purchase strawberries from his friend and hopes that $.80 per quart will help his friend’s farm become profitable again.
Required:
- 1. Develop the standard cost for the direct-cost components of a 10-gallon batch of strawberry jam. The standard cost should identify the following amounts for each direct-cost component of a batch of strawberry jam: (a) standard quantity, (b) standard price or rate, and (c) standard cost per batch.
- 2. Citing the specific ethical standards of competence, confidentiality, integrity, and credibility for
management accountants (see “IMA Statement of Ethical Professional Practice” in Chapter 1), explain why Joe Adams’s behavior regarding the cost information provided to Doug Gilbert is unethical. - 3. As part of the implementation of a standard-costing system at Quincy Farms, Doug Gilbert plans to train those responsible for maintaining the standards in the use of variance analysis. Gilbert is particularly concerned with the causes of unfavorable variances. Discuss the possible causes of the following unfavorable variances and identify the individual(s) who should be held responsible: (a) direct-material purchase price variance and (b) direct-labor efficiency variance.
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Chapter 10 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 10 - Prob. 1RQCh. 10 - What is meant by the phrase management by...Ch. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - What is the interpretation of the direct-material...Ch. 10 - What manager is usually in the best position to...Ch. 10 - What is the interpretation of the direct-material...Ch. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - What is the interpretation of the direct-labor...Ch. 10 - What manager is generally in the best position to...Ch. 10 - What is the interpretation of the direct-labor...Ch. 10 - What manager is generally in the best position to...Ch. 10 - Prob. 16RQCh. 10 - Describe five factors that managers often consider...Ch. 10 - Discuss several ways in which standard-costing...Ch. 10 - Describe how standard costs are used for product...Ch. 10 - Prob. 20RQCh. 10 - Prob. 21RQCh. 10 - Saskatewan Can Company manufactures recyclable...Ch. 10 - Refer to the data in the preceding exercise. Use...Ch. 10 - Cayuga Hardwoods produces handcrafted jewelry...Ch. 10 - During June, Danby Companys material purchases...Ch. 10 - Refer to the data in the preceding exercise. Draw...Ch. 10 - The director of cost management for Odessa Company...Ch. 10 - Due to evaporation during production, Plano...Ch. 10 - Prob. 30ECh. 10 - Refer to the data in Exercise 1022, regarding...Ch. 10 - Saskatewan Can Company manufactures recyclable...Ch. 10 - New Jersey Valve Company manufactured 7,800 units...Ch. 10 - Prob. 34PCh. 10 - During May, Joliet Fabrics Corporation...Ch. 10 - Sal Amato operates a residential landscaping...Ch. 10 - Santa Rosa Industries uses a standard-costing...Ch. 10 - The following data pertain to Colgate-Palmolives...Ch. 10 - Orion Corporation has established the following...Ch. 10 - Associated Media Graphics (AMG) is a rapidly...Ch. 10 - The director of cost management for Portland...Ch. 10 - Ogwood Companys Johnstown Division is a small...Ch. 10 - Quincy Farms produces items made from local farm...Ch. 10 - Schiffer Corporation manufactures agricultural...Ch. 10 - Aqua float Corporation manufactures rafts for use...Ch. 10 - Rocky Mountain Camping Equipment, Inc. has...Ch. 10 - Springsteen Company manufactures guitars. The...Ch. 10 - Springsteen Company manufactures guitars. The...Ch. 10 - European Styles, Inc. manufactures womens blouses...Ch. 10 - MacGyver Corporation manufactures a product called...
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