Author Question: The type of account and normal balance of Accumulated Depreciation are a. contra asset, debit. b. ... (Read 487 times)

vinney12 · **on:** Jul 6, 2018

The type of account and normal balance of Accumulated Depreciation are
a. contra asset, debit.
b. asset, credit.
c. asset, debit.
d. liability, credit.
e. contra asset, credit.

Question 2

Budgeting and ethics.

Jayzee Company manufactures a variety of products in a variety of departments and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets and usually provide information about input quantities for materials, labor, and overhead costs.
Kurt Jackson is the manager of the department that produces product Z. Kurt has estimated these inputs for product Z:

The department produces about 100 units of product Z each day. Kurt's department always gets excel- lent evaluations, sometimes exceeding budgeted production quantities. For each 100 units of product Z produced, the company uses, on average, about 48 hours of direct manufacturing labor (eight people working 6 hours each), 790 pounds of material, and 39.5 machine-hours.
Top management of Jayzee Company has decided to implement budget standards that will challenge the workers in each department, and it has asked Kurt to design more challenging input standards for product Z. Kurt provides top management with the following input quantities:

Discuss the following:
1. Are these budget standards challenging for the department that produces product Z?
2. Why do you suppose Kurt picked these particular standards?
3. What steps can Jayzee Company's top management take to make sure Kurt's standards really meet the goals of the firm?

scrocafella · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

E

Answer to Question 2

1. The standards proposed by Kurt are not challenging. In fact, he set the target at the level his department currently achieves.

Direct materials: 7.9 lbs. 100 units = 790 lbs.
Direct manufacturing labor: 29 min. 100 units = 2,900 min 60 = 48.33 hrs. Machine time: 23.6 min. 100 units = 2,360 min. 60 = 39.33 hrs. approx

2. Kurt probably chose these standards so that his department would be able to make the goal and receive any resulting reward. With a little effort, his department can likely beat these goals.

4. Top management should point out that the targets set by Kurt are targets that the department already achieves. Top management is seeking targets that are slightly difficult to achieve, a stretch target that would challenge workers.
As discussed in the chapter, benchmarking might also be used to highlight the easy targets set by Kurt and to determine more challenging targets. Perhaps the organization has multiple plant locations that could be used as comparisons. Alternatively, management could use industry averages. Also, management should work with Kurt to better understand his department and encourage him to set more realistic targets. Finally, the reward structure should be designed to encourage increasing productivity, not beating the budget. Management could also set continuous improvement standards.