Professional Documents
Culture Documents
Ch11SM PDF
Ch11SM PDF
DISCUSSION QUESTIONS
Q11-1. Yes, to the extent that it is practical to meas- Q11-6. Generally, hourly earnings go up with
ure the value added or the productivity of a increased production, and labor cost per
worker. However, measurement of the contri- unit of output is reduced. High production
bution of each individual is never exact. Also, rates also reduce overhead cost per unit of
a business cannot pay more for materials or output, which is often the most significant
labor than the sales price will recover. savings.
Materials, workers, and machines produce Q11-7. (a) During periods of curtailed activity, it is
products and services. There must be a differ- just as necessary to keep costs down as
ence between revenue and costs consumed; it is when operating at full capacity.
otherwise, the business cannot survive. Assuming that the incentive wage plan
Q11-2. Productivity may be defined as the measure- resulted in greater labor efficiency and
ment of production performance using the lower costs per unit at full capacity, then
expenditure of human effort as a yardstick. In the labor cost per unit should be lower in
a broader sense, it may be described as the a slack period if the incentive wage scale
efficiency with which resources are converted is continued. A shorter workweek or some
into commodities and/or services that people other system of sharing the work would
want. be indicated.
Q11-3. Productivity is important to a firm because (b) Ordinarily, it is not a propitious time to ini-
high productivity reduces the unit cost of the tiate an incentive wage plan when a plant
output and makes the firm more competitive. is operating far below capacity, because
It is important to workers because their real the worker is already fearful of something
earnings should be increased when produc- less than full employment. If a reasonable
tivity is high. Productivity is important to soci- day’s work is being received for the going
ety because increased productivity enables rate of pay, postponement of the incentive
society to get more and better output from the plan is indicated. However, there is a nat-
basic resources of the economy. ural tendency for workers to reduce output
Q11-4. To measure labor efficiency, it is necessary to during such periods, thereby increasing
establish a standard of performance. This costs, with a tendency to bring about fur-
means determining how much a worker ther reduction in the volume that can be
should be able to produce, or how much a sold. With full explanation and under-
work crew should be able to produce. The standing of the situation, the incentive
standard is determined by time and motion wage could be introduced with a plant
study, test runs by skilled workers, and aver- operating at 60% capacity.
ages of past performance by skilled workers. Q11-8. In the straight piecework plan, each worker is
Q11-5. The purpose of an incentive wage plan is to paid a certain amount for each unit produced,
induce a worker to produce more, resulting in while being guaranteed a base hourly wage.
a higher wage and reduced conversion cost In the 100% bonus plan, each worker is paid
per unit. Frequently, machine output is limited for the standard time to complete the job or
by worker performance. If employee perform- units if the job or units are finished in standard
ance can be increased, machine cost per unit time or less. In the group bonus plan, workers
of production will decrease. An incentive in a group are paid their standard hourly
wage plan may also reduce loafing, indiffer- wage. If the group produces units in excess of
ence, and carelessness, and may generate a the standard, the workers are paid for the time
cost-conscious labor force. saved.
11-1
11-2 Chapter 11
and vacation pay are paid, the on a systematic and rational basis
accrued liability account is debited that does not distort the operating
and the cash and withholding results of any one year. These
accounts are credited. costs are incurred in contempla-
Q11-20. Appendix The recommended method in tion of the present and future serv-
computing costs under a pension ices not only of the individual
plan is to determine actuarially employee, but also of the organi-
the eventual pension payments to zation as a whole. Benefits of the
covered employees and to charge plan—such as improved morale,
these future payments as a cost removal of superannuated employ-
of current production over the ees, and attraction of more desir-
expected period of active service of able personnel—are expected to
covered employees. Costs based improve the operating efficiency of
on past services should be written a company.
off over some reasonable period
11-4 Chapter 11
EXERCISES
E11-1
ORANGE CITY CANNING COMPANY
Labor Schedule for Jaime Vasquez
For First Week in June
E11-2
(1) Monday Tuesday Wednesday
Hours × hourly rate............ ................... $64.00 $64.00 $64.00
Units above standard............................ 0 10 15
Hours saved........................................... .50 .75
Value of time saved .............................. $ 4.00 $ 6.00
80% of value of time saved .................. $ 3.20 $ 4.80
Earnings ................................................ $64.00 $67.20 $68.80 $200.00
860
(2) Efficiency ratio: = 107.5%
800
E11-3
Standard Labor Overhead Con-
Hours for Regular Bonus Total Cost Cost version
Units Units Actual Group (Hrs. Saved Group per per Cost per
Day Produced Produced Hours Wage @$12.50) Earnings Unit Unit Unit
Monday 460 46.0 48 $600 $ 0 $600.00 $1.304 $2.087 $3.391
Tuesday 475 47.5 48 600 0 600.00 1.263 2.021 3.284
Wednesday 492 49.2 48 600 15.00 615.00 1.250 1.951 3.201
Thursday 500 50.0 48 600 25.00 625.00 1.250 1.920 3.170
Friday 510 51.0 48 600 37.50 637.50 1.250 1.882 3.132
E11-4
(1)
Hours Standard Actual % % Base Amount Total
Day Worked Production Production Excess Excess Bonus Earnings Bonus Earnings
Monday 80 16,000 17,824 1,824 11.4 5.70 $ 720 $ 41.04 $ 761.04
Tuesday 74 14,800 16,206 1,406 9.5 4.75 666 31.64 697.64
Wednesday 80 16,000 18,048 2,048 12.8 6.40 720 46.08 766.08
Thursday 76 15,200 17,480 2,280 15.0 7.50 684 51.30 735.30
Friday 72 14,400 16,733 2,333 16.2 8.10 648 52.49 700.49
Total 382 76,400 86,291 9,891 12.9 6.45 $3,438 $222.55 $3,660.55
(2) Assuming each employee receives the base wage of $9 per hour and that all members of the crew worked the
same number of hours during the week, earnings per worker would be $366.06 for the week
($3,660.55 ÷ 10).
11-5
11-6 Chapter 11
E11-5
20A productivity ratio =
20A standard hours for work done ÷
20A total actual direct and indirect labor hours =
643,823 ÷ 1,525,324 = .422089
E11-7
Bridge Cumulative Average
Number × Required Weeks per Bridge
1 100
2 80 (100 weeks × 80%)
4 64 (80 weeks × 80%)
8 51.2 (64 weeks × 80%)
7 additional bridges must be built in order to bring the cumulative average below 52
weeks.
Chapter 11 11-7
E11-8
(1) The schedule below demonstrates the 80% learning curve that the company
expects to experience in producing the time devices:
Cumulative
Cumulative Average Cumulative
Lots × Time = Time
1 90.00 hours 90.00 hours
2 72.00 144.00
4 57.60 230.40
8 46.08 368.64
(2) The company should establish the standard for direct labor time equal to the
marginal direct labor time required to produce the eighth lot, providing steady-
state production occurs after the eighth lot. To assure that this standard time
will be accurate, the company should:
(a) Keep accurate records through the first 8 lots to determine if an 80% learn-
ing factor is experienced.
(b) Continue to keep accurate records for each successive production lot to
provide a basis for:
1. Conformance to expectations about labor time (i.e., steady state pro-
duction after 8 lots), or
2. Determining when steady-state production does occur.
E11-9 APPENDIX
(1) Overtime premium charged to production worked on during the overtime
hours:
E11-10 APPENDIX
Subsidiary
Record Dr. Cr.
Factory Overhead Control ................................ 201.60
Bonus Pay ........................................ 134.401
Vacation Pay .................................... 67.202
Liability for Bonus .................................... 134.40
Liability for Vacation Pay ........................ 67.20
E11-11 APPENDIX
Factory Overhead Control ($35,000 × 28%) ............... 9,800
Marketing Expenses Control ($8,000 × 28%) ............. 2,240
Administrative Expenses Control ($7,000 × 28%) ..... 1,960
Liability for Pensions ($50,000 × 7.8%) ............ 3,900
Liability for Other Postretirement Benefits
($50,000 × 2.3%) ............................................ 1,150
FICA Tax Payable ($50,000 × 7.5%) ................... 3,750
Federal Unemployment Tax Payable
($50,000 × .8%) .............................................. 400
State Unemployment Tax Payable
($50,000 × 4.6%) ............................................ 2,300
Workers’ Compensation Insurance Payable
($50,000 × 1%)................................................ 500
Medical Insurance Payable ($50,000 × 4%) ....... 2,000
CGA-Canada (Adapted). Reprint with permission.
E11-12 APPENDIX
(1) The entry to record the payroll liability:
PROBLEMS
P11-1
(1) Present cost:
(2) If a production rate above 40 units per employee per 8-hour day is reasonably
attainable by the worker, the employee earnings will increase under the piece-
work proposal. Since conversion cost per unit decreases with increased output,
management should favor the piecework proposal.
P11-2
(1)
Regular Workweek Incentive Wage Plan
Total Incentive Pay Total
Hourly Work- Labor Base Pay (Units Produced × Labor
Employee Rate Week Cost (Base Rate × Work Hours) + Incentive Premium) = Cost
Clancy, D .... $6.00 × 40 hrs. = $240 $3.50 × 40 hrs. = $140 165 × $1.00 = $165 $ 305
Luken, T ..... 8.00 × 40 hrs. = 320 5.50 × 40 hrs. = 220 165 × 1.00 = 165 385
Schott, J..... 7.00 × 40 hrs. = 280 4.50 × 40 hrs. = 180 165 × 1.00 = 165 345
Total direct labor ............. $840 Total direct labor....................................................... $1,035
$195
$1,035 – $840 = $195 labor cost increase Proof: = 23.2% labor cost increase
$840
Chapter 11 11-11
P11-2 (Concluded)
(2) To assess properly the effectiveness of the new plan, it is necessary to ana-
lyze its effect on conversion costs and not just on direct labor costs.
Although direct labor cost per unit may rise, this increase may be more than
offset by distributing the overhead over a larger volume.
A comparison of the two pay plans and their effects on conversion cost per
unit shows:
The decrease in conversion cost is minimal; however, the fact that customers
can be served sooner might be worth additional labor cost. Based on learning
curve theory, the productivity of the worker might increase sufficiently to
reach a more satisfactory output and cost level.
11-12
P11-3
(1)
Units Time Value of Total Effective Unit
Units Hourly Daily Above Saved Time Premium Daily Rate per Labor
Day Produced Hours Rate Wage Standard (Hours) Saved 60% Earnings Hour Cost
Monday 140 8 $9 $72 $72.00 $ 9.000 $.514
Tuesday 160 8 9 72 72.00 9.000 .450
Wednesday 175 8 9 72 15 .75 $6.75 $4.05 76.05 9.506 .435
Thursday 180 8 9 72 20 1.00 9.00 5.40 77.40 9.675 .430
Friday 200 8 9 72 40 2.00 18.00 10.80 82.80 10.350 .414
(2)
Piecework Rates Total Effective Unit
Units Standard Below Standard and More Than Daily Rate per Labor
Day Produced Production Standard Up to 20% Over 20% Above Earnings Hour Cost
Monday 140 160 $.40 $ 56.00 $ 7.00 $.40
Tuesday 160 160 $.48 76.80 9.60 .48
Wednesday 175 160 .48 84.00 10.50 .48
Thursday 180 160 .48 86.40 10.80 .48
Friday 200 160 $.56 112.00 14.00 .56
Chapter 11
Chapter 11 11-13
P11-3 (Concluded)
P11-4
(1) Conversion
Labor Cost Overhead Cost
Units per Unit (to per Unit (to per Unit (to
Units Daily Above Hours Premium Total four decimal four decimal four decimal
Day Produced Wage Standard Saved Wage Pay places) places) places)
Monday 180 $48 0 0 $0 $48.00 $.2667 $.1333 $.4000
Tuesday 200 48 8 1/3 1.80 49.80 .2490 .1200 .3690
Wednesday 220 48 28 1 1/6 6.30 54.30 .2468 .1091 .3559
Thursday 224 48 32 1 1/3 7.20 55.20 .2464 .1071 .3535
Friday 192 48 0 0 0 48.00 .2500 .1250 .3750
(2) Conversion
Labor Cost Cost
Efficiency Base × per Unit (to per Unit (to
Hours Units Standard Ratio Base Efficiency Week’s four decimal four decimal
Worked Produced Production (nearest %) Wage Ratio Earnings places) places)
40 1,016 960 106 $6 $6.36 $254.40 $.2504 $.3685
(3) Conversion
Labor Cost cost
per Unit (to per Unit (to
Units Hourly Amount four decimal four decimal
Day Produced Wage Earned places) places)
Monday 180 $6.00 $48.00 $.2667 $.4000
Tuesday 200 6.30 50.40 .2520 .3720
Wednesday 220 6.30 50.40 .2291 .3382
Thursday 224 6.30 50.40 .2250 .3321
Friday 192 6.30 50.40 .2625 .3875
Chapter 11
Chapter 11 11-15
P11-5
Straight Piecework
Dodd Hare Lowe
Units produced—regular time ......................... 400 410 370
Piecework rate.................................................... $ .66 $ .66 $ .66
Piecework pay .................................................... $264.00 $270.60 $244.20
Downtime pay..................................................... 30.00 0 24.00
Overtime pay ...................................................... 0 54.001 36.00
Total wages ........................................................ $294.00 $324.60 $304.20
Wages per books ............................................... 284.00 277.20 302.20
Underpayment ................................................... $ 10.00 $ 47.40 $ 2.00
16 × $6 × 150% = $54
P11-5 (Concluded)
Emerson Efficiency System
Suggs Ward
Units produced ............................................................. 240 590
Standard production ................................................... 300 5701
Efficiency ratio.............................................................. 80% 103.5%
Bonus rate .................................................................... 20% 45%
Regular wage ................................................................ $224.002 $212.803
Bonus wage ................................................................. $ 44.80 95.76
Downtime pay (2 hours × $5.60) ................................. 11.20
Total wages ................................................................... $268.80 $319.76
Wages per books.......................................................... 233.20 280.00
Underpayment............................................................... $ 35.60 $ 39.76
1
600 units (st an dard production for 40 hours)
= 15 units per hour
40 hours
15 units per hour × 38 productive hours = 570 units (standard production for 38
hours)
P11-6
(1) Hours worked (5 workers × 40 hours) ........................ 200
Regular wage (200 hours × $6) ................................... $ 1,200
Units produced ............................................................. 452
Bonus............................................................................. $52*
Weekly earnings ........................................................... $ 1,252
Unit labor cost ($1,252 ÷ 452) ..................................... $2.7699
Unit factory overhead ($1,400 ÷ 452).......................... $3.0973
Unit conversion cost ................................................... $5.8672
P11-6 (Concluded)
(2)
Monday Tuesday Wednesday Thursday Friday Total
saved, or $156. Then, $1,356 ÷ 452 units = $3 unit labor cost. Overhead cost would be $1,400 ÷ 452
units, or $3.0973 per unit.
P11-7
(1) THOMAS INC.
Quarterly Bonus Allotment
At End of March
Points
Employees Allowed for Total Share Total
Participating Each Employee Points per Point Share
1 Works manager ................. 250 250 $3.125* $ 781.25
2 Production engineers ........ 200 400 3.125 1,250.00
5 Shop supervisors............... 200 1,000 3.125 3,125.00
1 Storekeeper ........................ 100 100 3.125 312.50
5 Factory office clerks ......... 10 50 3.125 156.25
150 Factory workers ............ 20 3,000 3.125 9,375.00
4,800 $15,000.00
P11-7 (Concluded)
(2) At the end of January no entry is required, since production was below 1/3 of
240,000 units, or 80,000 units. The deficiency was 5,000 units (80,000 – 75,000).
Subsidiary
Record Dr. Cr.
Factory Overhead Control ................................ 4,500*
Bonus Pay ........................................ 4,500
Liability for Bonus .................................... 4,500
*Excess units (94,000 – 80,000) 14,000 units
Less January deficit .......................5,000
Net excess .......................................9,000 units
9,000 × $.50 = $4,500
P11-8
(1)
Cumulative Cumulative Time in Hours
Number Number of Units Cumulative
of Lots (Lot Size = 50) Average Time Per Unit Cumulative Time
1 50 4.0000
2 100 3.6000 (4.0000 × .9) 360.00 (3.6000 × 100)
4 200 3.2400 (3.6000 × .9) 648.00 (3.2400 × 200)
8 400 2.9160 (3.2400 × .9) 1,166.40 (2.9160 × 400)
16 800 2.6244 (2.9160 × .9) 2,099.52 (2.6244 × 800)
Direct labor hours required to produce the first 800 units ................... 2,099.52
Direct labor hours required to produce the first 200 units ................... 648.00
Direct labor hours required to produce the next order ......................... 1,451.52
Number of units in the next order ........................................................... 600
Direct labor hours per unit for the next order (1,451.52 ÷ 600) ............ 2.4192
Estimates
Incorporating
a 90% Learning
Curve
Materials ........................................................................ $180.00
Labor and employee benefits (2.419 × $20) ............... 48.38
Variable overhead (50% of labor)................................ 24.19
Total variable cost ................................................. $252.57
Fixed overhead ............................................................ 40.00
Full cost................................................................... $292.57
Profit contribution (10% of full cost) ......................... 29.26
Estimated contract price ....................................... $321.83
(2) The implications of an 80% learning curve as opposed to a 90% learning curve
are:
(a) An 80% learning curve indicates a greater effect of experience on efficiency.
(b) Most of the increase in efficiency (decrease in time and cost per unit) due to
an 80% learning curve occurs early in the production run; thus, saturation in
learning is achieved earlier with an 80% learning curve.
11-20 Chapter 11
P11-8 (Concluded)
(3) The degree of learning that takes place in an industrial operation would be
reduced by:
(a) a low proportion of assembly labor to machine labor;
(b) an operation of low complexity;
(c) high employee turnover;
(d) tedium;
(e) poor working conditions.
P11-9 APPENDIX
(1) Charge to work-in-process:
Normal working hours = 40 hours × 2 = 80 hours
Let X = overtime hours
$1.140−(80×$12)
X=
($12×1.5)
X = 10 hours
P11-10 APPENDIX
(1) Apr. 7 Payroll............................................... 5,890.00
Accrued Payroll ............................. 4,888.70
Employees Income Tax Payable (9.5%) 559.55
FICA Tax Payable (7.5%) ............... 441.75
14 Payroll............................................... 4,920.00
Accrued Payroll ............................. 4,083.60
Employees Income Tax Payable... 467.40
FICA Tax Payable .......................... 369.00
21 Payroll............................................... 5,900.00
Accrued Payroll ............................. 4,897.00
Employees Income Tax Payable... 560.50
FICA Tax Payable ........................... 442.50
28 Payroll............................................... 4,880.00
Accrued Payroll ............................. 4,050.40
Employees Income Tax Payable .. 463.60
FICA Tax Payable .......................... 366.00
Chapter 11 11-21
C11-1
(1) Arguments used by each proponent:
(a) 1,000-pieces-per-hour-rate:
(1) Studies show that machines can be operated at this rate.
(2) Variances determined by this output rate will measure the ineffective
use of the machines.
(3) This rate can be a target level to be strived for, and the changing vari-
ances will show progress toward this target.
(4) A goal of this nature will motivate the supervisor, and thereby the work-
ers, to reach this rate of output.
(b) 750-pieces-per-hour-rate:
(1) This rate of output has been attained by some workers.
(2) The 1,000-pieces-per-hour rate has not been attained, nor has any rate
near to it been attained.
(3) The 600-pieces-per-hour rate is an average of actual performance and
does not represent good economical performance.
(4) The standard cost should reflect production rates that can be attained
when good economical performance occurs. The 750-pieces-per-hour
rate, capable of being achieved by some workers, would seem to be
such a performance.
(5) The variances would measure the extent by which this economical level
has been exceeded or the extent to which it has not been met.
(6) It should provide motivation for the supervisor to improve on the 600-
pieces-per-hour current rate and in turn motivate the employees to
improve their performance.
(c) 600-pieces-per-hour rate:
(1) This rate has been achieved by the department as a whole. The standard
costs should be set to reflect the ability of the whole department.
(2) The variances from standard cost based upon the 600-pieces-per-hour
rate would measure the departures, favorable and unfavorable, from the
current effective level of operations.
(3) For two thirds of the workers, the 750-pieces-per-hour rate would be dif-
ficult to attain and would tend to frustrate them, thus making even the
present 600-pieces-per-hour rate difficult to maintain. For all workers,
the 1,000-pieces-per-hour rate could not be attained, thus lowering the
morale of the department and probably lowering output below current
levels.
(4) The 600-pieces-per-hour-rate, when passed down to the production
worker, would be an appropriate goal for those three employees who are
producing fewer than 600 pieces per hour.
Chapter 11 11-23
C11-1 (Concluded)
(2) The purpose of standard costs and standard cost reporting is to measure the
performance of a department against a level of cost incurrence that represents
attainable good economical performance. The variances indicate the periods
when the performance varied (favorably or unfavorably) from this acceptable
level.
To be used effectively, the rate to motivate the supervisor and, thereby, the
workers to improve performance would depend upon the perceptions as to
what is attainable. It would also depend upon the reward structures within the
firm. Other variables would also affect what output rate would motivate
improved performances.
The value picked (e.g., 1,000, 750, or 600) must be a compromise between
the level that will have the most effective motivational result and that which will
be an effective representation of the costs when the department is operating at
an acceptable economical level. The 1,000-pieces-per-hour rate should be
rejected because it does not provide the basis for a measure of an acceptable
cost level. It would also be of questionable value from a motivational point of
view, because it appears to be unattainable by the production workers.
The 750-pieces-per-hour rate is a possible choice. It is capable of being
achieved by some workers and as such may provide motivation to the supervi-
sor to bring other workers up to that level, thus achieving a departmental out-
put of 750 pieces per hour. It also may represent the appropriate basis for a
standard cost because it is a possible acceptable level of performance. It may
also be a suitable departmental target established in connection with the intro-
duction of the standard cost system.
The 600-pieces-per-hour rate is also a possible candidate. The Punch
Press Department has achieved this level, and three of the six employees have
been able to achieve it. It is, however, the current level of output and that may
make it ineffective in motivating the department and its workers to improve the
level of output. As the basis for standard costs, it could represent an acceptable
level of output; but it does not incorporate the possible improvement likely to
be obtained in connection with an introduction of a cost system.
The 750-pieces-per-hour rate seems to be the best choice of the three
alternatives. More information about the conditions under which the engineer-
ing studies were done, the training and experience of the workers, and the trend
of worker and department output in recent periods would be necessary, before
the number could be chosen with some assurance that it would meet the stated
objectives.
11-24 Chapter 11
C11-2
(1) An advantage of the new payroll incentive plan is that it recognizes a problem,
which should improve employee motivation. Action taken by management will
be perceived as a positive effort to resolve a problem, and employees may feel
more a part of the group and behave as team members.
Some disadvantages, which could lower employee motivation, are that
employees’ files are open to scrutiny by peers, and that employees may feel that
they have to be a part of the “in group” to be assured recognition for wage
increases. The plan could degenerate into a popularity contest.
(2) Some advantages that should improve employee productivity are the incentives
the plan provides for employees to perform efficiently and effectively, and the
beneficial competition it promotes among employees, as long as it is in har-
mony with corporate goals.
A disadvantage that could lower employee productivity is that the plan
could lead to collusion among groups of employees to keep productivity levels
artificially low. Employees could approve each other’s wage requests without
appropriate merit. The plan also could result in inefficiencies, because employ-
ees who have had their wage increases turned down may not work up to capac-
ity due to a loss of interest.
(3) Some advantages that should improve goal congruence between the employee
and the company are that the plan indicates the company’s interest in the needs
of the employees, and that the plan may result in increased profit through
improved productivity, which may lead to employees earning a larger income
through increases in wages.
Some disadvantages that could lower goal congruence are that employ-
ees may mistrust a wage plan suggested and implemented by management,
and that there may be an overemphasis on a limited range of performance
measures.
(4) Some advantages that should improve administration of the plan are that pro-
cedures for requesting a wage increase and for its approval are clear and unam-
biguous, and the plan allows for relatively quick positive feedback and peer
recognition.
Some disadvantages that could hamper plan administration are that there
is a limited amount of management input and control, and that there will be
additional record-keeping responsibilities associated with the voting proce-
dures and maintenance of employee productivity records and personnel files.
Chapter 11 11-25
C11-3
(1) The basic premise of the learning curve is increased productivity as experience
is gained in the performance of repetitive tasks. Various inputs to the produc-
tion process may be used more efficiently as cumulative output increases, but
in most production processes the majority of cost savings associated with a
learning phenomenon involve the use of human labor.
(3, 200 + 2, 240) ÷ 16 340
(2) = = 85% learning rate
3, 200 ÷ 8 400
(3) With a learning rate up to cumulative output of 32 units, average direct labor
hours used to produce these 32 units should equal 85% of the average direct
labor hours used to produce the first 16 units. In short, average hours employed
for each unit when 32 units are completed should equal:
This implies a total of 289 × 32 = 9,248 hours used in the production of the first
32 units, or
used in the production of units 17 through 32. If the average hours per unit in
this production batch is taken as the direct labor standard, the standard per unit
becomes:
3, 808 hours
= 238 hours per unit
16 units
(5) Some applications of the learning curve in the planning and controlling of busi-
ness operations are setting performance standards, preparing cost estimates in
competitive bidding, determining budget allowances for labor and labor-related
costs, scheduling labor requirements, and determining performance evalua-
tions in which periodic progress reports are compared with accomplishments
expected under the curve.
11-26 Chapter 11
C11-4
Shortcomings:
(1) Actual payroll hours are not approved by production management.
(2) There is inadequate segregation of duties within the Payroll Department.
(3) Personnel Department should not have access to payroll checks.
(4) Department supervisors should not distribute the payroll checks.
C11-5
(The requirement does not ask for a list of responsibilities Osborne has violated,
but, merely, which of the fifteen responsibilities apply to Osborne’s situation.)
Integrity: Refrain from engaging in any activity that would prejudice their
ability to carry out their duties ethically. (Osborne is being asked to be a party
to an activity that would erode his ability to carry out his duties ethically.)
11-5 (Concluded)