Establishing a Standard Cost System

question 2

Essay

Establishing a Standard Cost System
The Tippa Canoe Company makes fiberglass canoes.The fiberglass resin is initially molded to the shape of a canoe,then sanded and painted.Metal or wooden seats and frames are added for stability.The Tippa Canoe Company was started several years ago in the owner's garage.The owner,Jeff George,did a lot of the initial manual labor with the help of a few friends.The company has since expanded into a large warehouse and new employees have been hired.Because of the expansion,Jeff is no longer directly involved with production and is concerned about his ability to plan for and control the company.He is considering the implementation of a standard cost system.
Required:
a.Describe the procedures Jeff should use in setting standards for direct labor and direct materials.
b.Describe how Jeff could use standards for planning purposes,
c.Describe how Jeff could use standards for motivating employees and problems in using standards as performance measures.
d.Why are some of Jeff's friends who worked with from the beginning not very excited about a change to a standard cost system?

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Definitions:

Moderate Exercise

Physical activity of moderate intensity that improves health and fitness without excessive strain or risk of injury.

Young Adult

An individual in the stage of life typically ranging from late teens to early thirties, often marked by the pursuit of education, career, and personal relationships.

Fatal Injuries

Injuries that lead directly to death, either immediately or as a consequence of complications arising from the injury.

Young Adults

Individuals in the transition phase between adolescence and full-fledged adulthood, typically aged between 18 and 25.