ACCOUNTING FOR MANAGERSPlease read the case study given below
and answer questions given at the end.Case StudyLabor standards
Geeta & Company has experienced increased production costs. The
primary area of concern identified by management is direct labor.
The company is considering adopting a standard cost system to help
control labor and other costs. Useful historical data are not
available because detailed production records have not been
maintained. To establish labor standards, Geeta & Company has
retained an engineering consulting firm. After a complete study of
the work process, the consultants recommended a labor standard of
one unit of production every 30 minutes, or 16 units per day for
each worker. The consultants further advised that Geeta's wage
rates were below the prevailing rate of Rs per hour. `Geeta's
production vice-president thought that this labor standard was too
tight, and from experience with the labor force, believed that a
labor standard of 40 minutes per unit or 12 units per day for each
worker would be more reasonable. he president of Geeta &
Company believed the standard should be set at a high level to
motivate the workers and to provide adequate information for
control and reasonable cost comparison. After much discussion,
management decided to use a dual standard. The labor standard of
one unit every 30 minutes, recommended by the consulting firm,
would be employed in the plant as a motivation device, while a cost
standard of 40 minutes per unit would be used in reporting.
Management also concluded that the workers would not be informed of
the cost standard used for reporting purposes. The production
vice-president conducted several sessions prior to implementation
in the plant, informing the workers of the new standard cost system
and answering questions. The new standards were not related to
incentive pay but were introduced when wages were increased to Rs7
per hour. The standard cost system was implemented on January 1,
19--. At the end of six months of operation, these statistics on
labor performance were presented to executive
management:JanuaryFebruaryMarchAprilMayJune
Production (units)5,1005,0004,7004,5004,3004,400
Direct labor hours3,0002,9002,9003,0003,0003,100
Quantity Variances:
Variance based on labor standard(one unit each 30 minutes)Rs3150
U*Rs2,800 URs3,850 URs5,250 URs5,950 URs6,300 U
Variance based on cost standard(one unit each 40 minutes)Rs2,800
FRs3,033 FRs1,633 F-0-Rs933 URs1,167 U
*U = Unfavorable; F = FavorableMaterials quality, labor mix, and
plant facilities and conditions have not changed to a significant
extent during the six month period.
1.Describe the impact of different types of standards on
motivations, and specifically, the likely effect on motivation of
adopting the labor standard recommended for Geeta & Company by
the engineering firm.
2.Please advise the company in reviewing the standards.
Quantitative Techniques in managementPlease read the case study
given below and answer questions given at the end.Case study:
Kushal Arora, a second year MBA student, is doing a study of
companies going publicfor the first time. He is curious to see
whether or not there is a significant relationship betweenthe sizes
of the offering (in crores of rupees) and the price perSHAREafter
the issue. Thedata are given below:
Size (in crore of rupees)1083968.405110.404.40
Price ( in rupees)121319126.504
1.You are required to calculate the coefficient of correlation
for the above data set and comment what conclusion Kushal should
draw from the sample.
