CHAPTER 9 standard costing: a functional-based control approach

1 discussion questions

1. Standard costs are essentially budgeted amounts on a per-unit basis. Unit standards serve as inputs in building budgets.

2. The quantity decision is determining how much input should be used per unit of output. The pricing decision determines how much should be paid for the quantity of input used.

3. Historical experience is often a poor choice for establishing standards because the historical amounts may include more inefficiency than is desired.

4. Ideal standards are perfection standards, representing the best possible outcomes. Currently attainable standards are standards that are challenging but allow for inefficiency. Currently attainable standards are often chosen because many feel they tend to motivate rather than frustrate.

5. By identifying standards and assessing deviations from the standards, managers can locate areas where change or corrective behavior is needed.

6. Managers generally tend to have more control over the quantity of an input used, rather than the price paid per unit of input.

7. The materials price variance is often computed at the point of purchase rather than issuance because it provides control information sooner. If the variance is computed at the point of issuance and a problem is detected, this problem could have been ongoing for weeks or months (depending on how long the direct materials were in inventory before being used).

8. Disagree. A direct materials usage variance can be caused by factors beyond the control of the production manager (e.g., purchase of a lower quality of direct materials than normal).

9. Disagree. Using higher-priced workers to perform lower-skilled tasks is an example of an event that will create a direct labor rate variance that is controllable.

10. Inefficient direct labor, machine