Question

Define standard cost and briefly indicatr how may be used by management and controlling

Answer 1

The production manager at Bramford Industries is investigating the cause of unfavorable materials and labor variances that occurred in the previous month. Standards are based on normal or expected production of 400 units per month at Bramford. The manager has discovered that 500 units were needed the previous month to meet shipment needs as ordered by headquarters. During the previous month. 100 units were spoiled, so production last month was actually 600 units.
Use your judgment to speculate as to why the variances occurred at Bramford last month.

Step-by-step solution:

Step 1 of 1

688-24-1BE SA CODE: 3946
RID: 269
The problem at Bramford Industries is a result of operating well above normal capacity. The standard rates and efficiencies were based on normal operations. Because production was required to be ramped up 25% above normal, there were likely to be overtime hours at higher pay, machine breakdowns, spoilage and waste that created significant unfavorable variances.