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Study Guide Exam 3

Study Guide Exam 3 - Chapter 10 Standards are there to...

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Chapter 10 Standards are there to encourage efficient future operations; they are used to specify how much of an input should be used to make a product or service (quantity) and to specify how much should be paid for each unit of the input (cost/price); they make it possible to notice deviations from the standard and bring it to the attention of management (MANAGEMENT BY EXCEPTION) SETTING STANDARDS Standard price per unit: purchase price plus any additional costs (ex. Freight expense) and less any discounts Standard quantity per unit: materials required (by bill of materials) plus allowance for waste, spoilage, and rejects Standard rate per hour: includes wages, employment taxes, and fringe benefits Standard hours per unit: basic labor time plus allowance for breaks, personal needs, cleanup and machine downtime, and rejects. Standard cost per unit: standard quantity allowed per unit X standard price Ideal standards can be attained only under the best circumstances with no breakdowns or interruptions and only the most skilled and efficient employees working at peak performance 100% of the time while practical standards are “tight but attainable” Standard-setting is done by accountants, engineers, purchasing agents, and production managers o Direct materials: purchasing manager o Direct labor: production manager o Variable MO: Management by Exception: If actual quantities deviate significantly from standard quantities, managers investigate the discrepancy to find the cause of the problem and eliminate it. Delivery Cycle time: the amount of time from when a customer oreer is received to when the completed order is shipped.
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Throughput time: (manufacturing cycle) the amount of time required to turn raw materials into completed products; o process time-amount of time work is actually done on the product o
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