Accepted Answer

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6 quarts accepted raspberries mean 7.5 quarts raspberry’s at 0.8= $6 (Remember for every 4 quarts of raspberry selected one quart of raspberry is rejected.
Other ingredients are @ 0.45 per gallon, so for 10 gallons we have $4.5
This gives us a direct materials cost of $10.50. STANDARD COST
Direct labor cost is
Raspberry acceptances 3 x 6 x 15 remember $9 per hour amounts to 0.15 per minute. $2.7
Blending 12 X 15 amounts to $1.8.
If we add this to the direct materials cost we get a total of $15.0. STANDARD COST
Packaging cost is 0.41$ per quart. There are four quarts in a gallon and so we have $1.64 per gallon and X 10 that is $16.4 per batch. STANDARD COST.
If we add this to the direct materials and labor cost we get a total standard cost of $21.4.
TRAINING DOCUMENT FOR STANDARD COSTING, VARIANCES IN PRICE AND MATERIALS
A product's standard cost is what it should cost to make the product. At the start of each month a production budget is prepared, using standard costs and estimated production quantities. At the end of each month a variance report is prepared to compare the production budget with the actual quantities and costs of production.
The variance report tells TasteFruit and its managers how well they did at achieving their budget goals. A favorable variance shows that actual costs are less than budgeted (standard) costs. An unfavorable variance is just the opposite - actual costs are greater than budgeted costs.
By using a budget the management team can estimate their future costs and cash needs, plan production, schedule employees, coordinate materials purchases, reduce waste, increase production efficiency and meet shipping deadlines. Variances help the managers identify specific areas where they came in either over or under budget. They will try to repeat their successes and eliminate their failures. Each month they hope to become a little more efficient.
The budgets will be used to evaluate managers. Their annual bonuses will depend on how well they meet their budget goals. Managers who consistently produce unfavorable variances will probably be replaced. We ask a few questions and answer them by using relevant variances. How well did management (managers) do:
· buying and using materials to make products?
· scheduling employee time and motivating employees to be efficient?
· controlling factory overhead costs?
Variances
1. Total Materials Variance
1. Materials Price Variance
2. Materials Quantity Variance
2. Total Labor Variance
1. Labor Rate Variance
2. Labor Efficiency Variance
3. Variable Overhead Variance
4. Fixed Overhead Variance

Variances and Standard Costs are entered into the accounting records using journal entries. The use of standard costing systems greatly simplifies some accounting procedures. Standard costs are entered weekly or monthly. Variances are calculated and entered. Monthly production and income reports are prepared. Managers use current information to prepare budgets for the coming months.

actual costs standard costs
^--------- difference = variance ---------^
$1200 $1250
^------- $50 favorable variance -------^ actual costs are less than standard = favorable variance
By breaking the total variance down into its component parts managers can pinpoint the cause of the variance. Sometimes a favorable variance in one area causes an unfavorable variance in another area. Managers should be alert to these possibilities.
For instance, there might be a favorable materials price variance, because lower cost materials were purchased. If the materials were of an inferior grade, there could be an increase in waste, giving rise to an unfavorable materials quantity variance. Additionally, more labor could be required to handle and deal with the inferior materials, giving rise to an unfavorable labor efficiency variance.
Don't be mislead by a small total variance. This example shows large favorable and unfavorable variances offsetting each other. This is not a sign of efficient or effective management.

quantity variance $1000 favorable
price variance (950) unfavorable
total variance $50 favorable
Changes in Costs
Variances can arise for a large number of reasons:
· errors in estimating
· mis-management of resources
· unforeseen price changes
· equipment breakdown
· labor problems
· poor planning
· shortage of raw materials
Budgeting and Variance accounting presume that managers should fix problems, not bury or hide them. It also presumes that these problems are short term problems, and can be effectively controlled in the future.
Sometimes there is a change in actual costs that necessitates a change in standard costs. For instance, a new labor contract could increase total labor costs by a predictable amount. Standard labor costs should be re-calculated to reflect the new actual labor costs. Once a new standard cost is calculated, future variances will be correctly reflected in the monthly variance report. If standard costs are not updated periodically, the monthly reports can show unrealistic favorable or unfavorable variances.

The purpose of variances and budgeting is to give management an effective tool for controlling costs. But the system must be continually reviewed and kept up to date. This is also important, because standard costs and variances are entered into the books as journal entries, so they must be based on reliable underlying assumptions. These assumptions must pass the critical eye of the company's certified auditors, so they must be current and accurate.



COMPETENCE
Adams has the responsibility to purchase the best possible materials at the lowest available prices. Adams has failed in that dury.
Management accountants have a responsibility to:
§ Maintain an appropriate level of professional competence by ongoing development of their knowledge and skills.
§ Perform their professional duties in accordance with relevant laws, regulations, and technical standards.
§ Prepare complete and clear reports and recommendations after appropriate analyses of relevant and reliable information.
CONFIDENTIALITY
Adams is not supposed to give the information about labor, materials and packaging costs to Wakefield.
Management accountants have a responsibility to:
§ Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.
§ Inform subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitor their activities to assure the maintenance of that confidentiality.
§ Refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.
INTEGRITY
Adams is not supposed to purchase materials from a costlier source for whatever personal consideration she may have. She has failed in this respect.
Management accountants have a responsibility to:
§ Avoid actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict.
§ Refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically.
§ Refuse any gift, favor, or hospitality that would influence or would appear to influence their actions.
§ Refrain from either actively or passively subverting the attainment of the organization's legitimate and ethical objectives.
§ Recognize and communicate professional limitations or other constraints that would preclude responsible judgement or successful performance of an activity.
§ Communicate unfavorable as well as favorable information and professional judgements or opinions.
§ Refrain from engaging in or supporting any activity that would discredit the profession.

OBJECTIVITY
Adams is not supposed to use subjective information to award the contract for the purchase of raspberries to a source that is costly.

Management accountants have a responsibility to:

Communicate information fairly and objectively.

Disclose fully all-relevant information that could reasonably be expected to influence an intended user's understanding of the reports, comments, and recommendations presented.
RESOLUTION OF ETHICAL CONFLICT
Adams may have felt that she was having a conflict of interest in confiding the information to Wakefield. The standards for resolution of conflict are as follows.

In applying the standards of ethical conduct, management accountants may encounter problems in identifying unethical behavior or in resolving an ethical conflict. When faced with significant ethical issues, management accountants should follow the established policies of the organization bearing on the resolution of such conflict. If these policies do not resolve the ethical conflict, such management accountants should consider the following courses of action.
§ Discuss such problems with the immediate superior except when it appears that the superior is involved, in which case the problem should be presented initially to the next higher managerial level. If a satisfactory resolution cannot be achieved when the problem is initially presented, submit the issues to the next higher managerial level. If the immediate superior is the chief executive officer, or equivalent, the acceptable reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact with levels above the immediate superior should be initiated only with the superior's knowledge, assuming the superior is not involved. Except where legally prescribed, communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate.

§ Clarify relevant ethical issues by confidential discussion with an objective advisor (e.g., IMA Ethics Counseling service) to obtain a better understanding of possible courses of action. - Consult your own attorney as to legal obligations and rights concerning the ethical conflict.
§ If the ethical conflict still exits after exhausting all levels of internal review, there may be no other recourse on significant matters than to resign from the organization and to submit an informative memorandum to an appropriate representative of the organization. After resignation, depending on the nature of the ethical conflict, it may also be appropriate to notify other parties.

The cause of confusion in the question is that initially the question does not mention the other products being made by Tastefruit. In addition, the question is silent on whether Adams is supposed to report cost related data to the Controller. Further, there is no need for Adams to purchase the costly raspberry out of sheer altruism. But the question is silent on the issue of her authority to do so. Finally, the question is silent on who will be responsible for implementing standard costing in Tastefruit.