1 / 5

Chapter 10: Standard Costing and Performance Measures for Today’s Manufacturing Environment

Chapter 10: Standard Costing and Performance Measures for Today’s Manufacturing Environment. Standard Costing Direct-material price and quantity variances Material purchase price variances and material usage variances Direct-labor rate and efficiency variances Problems.

talasi
Download Presentation

Chapter 10: Standard Costing and Performance Measures for Today’s Manufacturing Environment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 10:Standard Costing and Performance Measures for Today’s Manufacturing Environment • Standard Costing • Direct-material price and quantity variances • Material purchase price variances and material usage variances • Direct-labor rate and efficiency variances • Problems

  2. Standard Costing and Variances Standard Costing: a predetermined cost for the production of goods or services, which serve as a benchmark against which to compare the actual cost. Cost Variance: difference between actual and standard cost. Favorable Variance: when the variance between standard and actual costs are good for the company. Unfavorable Variance: when the variance between standard and actual costs are not good for the company. Variance Analysis: 1- from a product costing perspective, to understand what is causing the variances. 2- from a managerial control and responsibility perspective to provide the proper incentive for managers

  3. Standard Costing and Variances Standard Direct total amount of material normally required Material Quantity: to produce a finished product (including allowances for waste and inefficiency. Standard Direct total delivered cost, after subtracting any Material Price: purchase discounts. Standard Direct number of hours normally needed to Labor Quantity: manufacture one unit or product Standard Direct total hourly cost of compensation, including Labor Rate: fringe benefits.

  4. Standard Costing and Variances: Definitions Variables SP = Standard price of input SQ = Standard quantity input units/outputs (e.g. four tires/car) SQA = Standard quantity allowed for acutal units produced (SQ*units produced) AQP = Actual quantity purchased AQU = Actual quantity used (produced) AP = Actual price Direct Material Price Variance = (AP-SP) * AQP Direct Material Quantity Variance = (AQU-SQA)*SP Direct Materials Budget Variance = Price variance - Quantity Variance (These formulas apply similarly for direct labor)

  5. Variance Analysis for Managerial Control Total Costs are broken down for Analysis Direct Materials Direct Labor Variable Overhead Fixed Overhead

More Related