Jared, Inc. produces glass shelves that are used in furniture. Each shelf requires 3.6 pounds of raw material at a cost of $2 per pound. Unfortunately, given the nature of the manufacturing process, one out of every five shelves is chipped, scratched, or broken at the beginning of production and has to be scrapped.On average, 20 good shelves are completed during each hour. Laborers who work on these units are paid $15 per hour.Required: A. Distinguish between perfection standards and practical standards.B. Who within an organization would be in the best position to assist in setting the: 1. direct-material price standard?2. direct-material quantity standard?3. direct-labor efficiency standard?C. Calculate a practical direct-material and direct-labor standard for each good shelf produced.
What will be an ideal response?
A. Perfection standards, or those achieved under nearly perfect operating conditions, assume peak efficiency at minimum cost. Employees are pushed to reach these ideal measures, often becoming discouraged. Practical standards, on the other hand, are high but attainable, thus presenting a realistic target for personnel. Such standards incorporate allowances for normal downtime and other typical inefficiencies.
| B. | 1. The purchasing manager. |
3. The production supervisor as well as industrial engineers.
C.
| Direct materials: 4.5 pounds* × $2 per pound | $9.00 |
| Direct labor: 0.05 hours* × $15 | 0.75 |
| Total | $9.75 |
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