traditional standard costing and tqm?
Lange Company manufactures abstract-shaped sculptures made out of liquid jade. Each sculpture requires two (2)gallons of liquid jade. Because of the instability of the liquid jade at times, some sculptures crack or shatter during the production process. The jade used in the broken sculptures cannot be reused and is discarded. On the average, one sculpture is expected to be lost for every nine sculptures produced. In other words, eight good sculptures are generated from every nine production attempts.
Under traditional standard costing, what amount should Lange use for the standard quantity of liquid jade per sculpture?
* 2.000 gallons
* 2.125 gallons
* 2.222 gallons
* 2.250 gallons
Under a total quality management (TQM)approach to standard costing, what amount should Lange use for the standard quantity of liquid jade per sculpture?
* 2.000 gallons
* 2.125 gallons
* 2.222 gallons
* 2.250 gallons
Under Trad std costing = 2.125
(9-8)/8 + 2.0 = 2.125 gallons.
Under TQM, Lange should use 2.000 gallons for std qty per structure because it assumes zero defects, no allowance for error, under the “do it right the first time” approach.
Hope this helps, Bill
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