Review Case Review Case 5.37 in your textbook. Using the questions provided as a guide, explain how you think the budget presented may impact the company.

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Review Case 5.37 in your textbook. Using the questions provided as a guide, explain how you think the budget presented may impact the company.

Miller Manufacturing makes several different products for the mountain biking enthusiast. In an extremely competitive market, Miller has assumed a strong position by stressing cost control. Several years ago, the company implemented a standard cost system based on practical standards that were considered fair and reasonable by both managers and line workers.

Last month, Miller hired Kate Daniel as its new controller. After a brief review of operations, Kate has decided to make some changes. She reviewed materials and labor standards, and believes they need to be revised. She has indicated to other managers that workers need to be better motivated and that tighter labor standards will provide that motivation.

Yesterday, Kate presented each departmental manager with a new annual budget based on the new standards. There was little discussion; however, one cost accountant mentioned that the new standards appeared to be quite a bit tighter than the old ones.

Required

1.

a. Describe any negative behaviors that managers and line workers may exhibit as a result of the tightening of the standards.

b. Can Kate take any actions to mitigate the negative behaviors you have identified?

c. How can tight standards have a positive effect on employees’ behavior?

d. Who should have participated in the setting of the new standards? How would their participation have improved the process?


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