Polarized glass cost 40000 40300 sheets of polarized

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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 2 / Exercise 61
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
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Polarized glass cost$40,000$40,300Sheets of polarized glass used800816Plastic casing cost$12,000$12,500Ounces of specialty plasticused4,0004,250Direct manufacturing laborcosts$36,000$37,200Direct manufacturing labor-hours2,0002,040The controller of the Savannah plant, Jim Williams, is disappointed with the standardcosting system in place. The standards were developed on the basis of a study done by an outsideconsultant at the start of the year. Williams points out that he has rarely seen a significant unfa-vorable variance under this system. He observes that even at the present level of output, workersseem to have a substantial amount of idle time. Moreover, he is concerned that the production su-pervisor, John Kelso, is aware of the issue but is unwilling to tighten the standards because thecurrent lenient benchmarks make his performance look good.Required:1.Compute the price and efficiency variances for the three categories of direct materials andfor direct manufacturing labor in July 2017.2.Describe the types of actions the employees at the Savannah plant may have taken to re-duce the accuracy of the standards set by the outside consultant. Why would employees takethose actions? Is this behavior ethical?3.If Williams does nothing about the standard costs, will his behavior violate any of thestandards of ethical conduct for practitioners described in the IMA Statement of Ethical Pro-fessional Practice (see Exhibit 1-7 on page 17)?
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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 2 / Exercise 61
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
4.What actions should Williams take?5.Williams can obtain benchmarking information about the estimated costs of Sunto’s com-petitors such as Garmin and TomTom from the Competitive Intelligence Institute (CII). Dis-cuss the pros and cons of using the CII information to compute the variances in requirement1.SOLUTION(30 min.) Price and efficiency variances, benchmarking and ethics.1.Budgeted navigation systems per unit = 4,080 systems ÷ 4,000 units = 1.02 systemsBudgeted cost of navigation system = $81,600 ÷ 4,080 units = $20 per systemBudgeted sheets of polarized glass per unit = 800 sheets ÷ 4,000 units = 0.20 sheetsBudgeted cost of sheet of polarized glass = $40,000 ÷ 800 sheets = $50 per sheetBudgeted ounces of specialty plastic per unit = 4,000 ounces ÷ 4,000 units = 1 ounce perunitBudgeted cost of specialty plastic = $12,000 ÷ 4,000 ounces = $3 per ounceBudgeted direct manufacturing labor cost per hour ($36,000 ÷ 2,000) = $18 per hourBudgeted direct manufacturing labor hours per unit = 2,000 hours ÷ 4,000 units = 0.50hours per unitActual output achieved = 4,400 XS unitsFlexible BudgetActual Costs(Budgeted InputIncurred Qty. Allowed for(Actual Input Qty.Actual Input Qty.Actual Output× Actual Price)× Budgeted Price×Budgeted Price)Navigation(4,450 × $20)(4,400 × 1.02 × $20)Systems$89,000$89,000$89,760$0$760 FPrice varianceEfficiency variancePolarized(816 × $50)(4,400 × 0.20 × $50)Glass$40,300$40,800$44,000$500 F$3,200 FPrice varianceEfficiency variancePlastic(4,250 × $3)(4,400 × 1 × $3)Casing$12,500$12,750$13,200$250 F$450 FPrice varianceEfficiency variance
DirectManufacturing(2,040 × $18)(4,400 × 0.50 × $18)Labor$37,200$36,720$39,600$480 U$2,880 FPrice varianceEfficiency variance2.Actions employees may have taken include:(a)Adding steps that are not necessary in working on a GPS unit.

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