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CHAPTER 9 STANDARD COSTING: A MANAGERIAL CONTROL TOOL DISCUSSION QUESTIONS 1. Standard costs are essentially budgeted amounts on a per-unit basis. Unit standards serve as inputs in building budgets. 2. Unit standards are used to build flexible budgets. Unit standards for variable costs are the variable cost component of a flexible budgeting formula. 3. Historical experience is often a poor choice for establishing standards because the his- torical amounts may include more ineffi- ciency than is desired. 4. Ideal standards are perfection standards, representing the best possible outcomes. Currently attainable standards are standards that are challenging but allow some waste. Currently attainable standards are often chosen because many feel they tend to mo- tivate rather than frustrate. 5. Standard costing systems improve planning and control and facilitate product costing. 6. By identifying standards and assessing devi- ations from the standards, managers can locate areas where change or corrective be- havior is needed. 7. Actual costing assigns actual manufacturing costs to products. Normal costing assigns actual prime costs and estimated overhead costs to products. Standard costing assigns estimated manufacturing costs to products. 8. A standard cost sheet presents the standard amount of and price for each input and uses this information to calculate the unit stand- ard cost. 9. Managers generally tend to have more con- trol over the quantity of an input used rather than the price paid per unit of input. 10. A standard cost variance should be investig- ated if the variance is material and if the be- nefit of investigating and correcting the devi- ation is greater than the cost. 11. Control limits indicate how large a variance must be before it is judged to be material and the process is out of control. Control limits are usually set by judgment although statistical approaches are occasionally used. 12. MPV is often computed at the point of pur- chase rather than issuance because it provides control information sooner. 13. Disagree. A materials usage variance can be caused by factors beyond the control of the production manager, e.g., purchase of a lower quality of material than normal. 14. Disagree. Using higher priced workers to perform lower skilled tasks is an example of an event that will create a rate variance that is controllable. 15. Some possible causes of an unfavorable labor efficiency variance are inefficient labor, machine downtime, and poor quality materi- als. 16. A kaizen standard is the planned improve- ment for the coming period. The kaizen sub- cycle implements the improvement, checks it, locks it in, and then begins a search for additional improvements. The maintenance subcycle sets a standard based on prior im- provements, executes, and checks the res- ults to make sure that performance con- forms to the new results. If not, then correct- ive action is taken. 17.
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This note was uploaded on 06/03/2008 for the course MA 022 taught by Professor Keating during the Fall '07 term at BC.

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