Question

Part 1: Service organizations also use standards. Describe what types of standards might be in effect at each of the following types of organizations: Hospitals Law firms Accounting firms Auto repair shops Fast-food restaurants Part 2: For the types of service organizations listed above, should ideal standards or practical standards be implemented? What are the advantages and disadvantages of each? If you were an employee at one of these organizations, which would you prefer and why? Does your answer change if you are the manager in charge of production? Why or why not?

Answer 1

Standards are used as the regulatory tool with management in order to safeguard that performance thus can be met in harmony with obedience standards as well as making energies to liken standards and actual operations.

Explanation:

Standards in lieu of Hospitals:

1.     Hospitals in harmony with standards setting linger to approve normal standards together with normal cost standards as the same is determined as well as founded on the standards of the industry. Owing to magnanimity in place of costs connected with medical associated services which limits ideal standards from being attained as it is built on cent percent competence on part of the individuals thus making the situation relating to the hospitals out-dated when associated with current scenario. Thereby practical standards offer normal cost methods which prevail the hospital industry to be predominant and accorded with the current market scenario in place of prices and otherwise

2.     Law firms are based on past based performance standards when made comparisons in lieu of costs whereby averages are calculated and the basis of these calculations is said to be on the past performance basis which entails standard costs associated with each of the aspects. Ideal costing standards would entail fixation of such costs but due to the differences in lieu of nature of each persistent action of such a firm as the costs move in a frequency which follows up and down pattern thereby indicating discrimination in terms of prices thus to ensure uniformity of the same averages are calculated to achieve singular and average based results.

3.     Accounting firms also have similar treatment in terms of cost standards based on averages as such averages are calculated o basis of past performance which are fluctuating and revolve around similar figures which makes averages as the most widely used and accepted in lieu of standard cost ascertainment. Ideal standards in such cases is not an option due to gradual and incremental nature of costs on basis of past experiences.

4.     Auto repair shops may follow anticipatory standards that entails the adjustment of costs incurred in a period to that of adjusted in accordance with past behavior keeping in mind future anticipations due to the nature of the industry. Ideal standards in this case is not acceptable due to fluctuating costs associated with spare parts thus involved which makes anticipatory standards more acceptable for purposes associated with replacement of the same as well.

5.     Fast food restaurants make use of current standards as they are in relevance to short term nature and the prevalent business conditions and provide for any kind of spoilage or wastage and is prevailing in nature and accordance with business standards that are currently being achieved and have scope for improvement by inculcating reforms persistent to the same. Therefore, practical standards can be reflected in the same.

PART 2.  Ideal standards must be used in situations whereby cent percent of individual and management responsibility can be attained which in current scenario is unattainable for any such industry because every machine or industry is subjected to breakdown and employees at the same place have certain limitations which acts as a hindrance in implementation of the same. But surgeries done in hospital require ideal standards as it is against the obligation pertaining to the existence of an individual whereas all other firms listed above are to be against ideal control and must follow Normal, expected as well as practical standards in order to make them attainable.

Ideal Standards:

Those standards which are not allowed any type of interruption in work, like breakdown of machinery, resting time period of employees, unavailability of raw material etc. According to ideal standards, workers should give 100% efficiency and machinery must be unstoppable until the work is not fully done.

Advantages:

1.     for increase in profit and reduction in per unit cost, it requires continuous work for excellence which results in increase in production.

2.     It also helps in improvement in work techniques and approaches.

3.     It also helps in evaluating efficiency of employees and capacity of plant.

4.     It also gives reminder to managers and workers about their work responsibilities.

Disadvantages:

1.     it is hard or almost impossible to achieve and thus it demotivates the employees.

2.     It is usually considered unrealistic for the planning and forecasting of inventory.

3.     The manifestation of large variances from ideal standards is normal which decreases the effectiveness of manage by allowance.

Practical Standards:

Those standards which allowed interruption in work, like breakdown of machinery, resting time period of employees, unavailability of raw material etc.

Advantages:

1.     It is easy to achieve in comparison to ideal standards because in this 100% efficiency is not mandatory which is almost to impossible to achieve.

2.     It also accepts normal wastages and inefficiencies which help in forecast and planning of inventory.

Disadvantages:

1.     in this workers becomes languid thereby creating ease flow of business environment that makes work efficiency to reduce at an alarming rate.

In manufacturing concerns my opinion would entail ideal standards which can be attained through proper motivation to employees as well as ensuring low break down chances in terms of machinery. Moreover attainable standards can also be chosen in form of an alternative for the same as standards comparison with actual can be done in lieu of performance of individuals and machinery performance with reference to standards set and production hours worked.