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

Download Presentation

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

Loading in 2 Seconds...

- 175 Views
- Uploaded on
- Presentation posted in: General

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

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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

- Standard Costing
- Direct-material price and quantity variances
- Material purchase price variances and material usage variances
- Direct-labor rate and efficiency variances
- Problems

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

Standard Directtotal amount of material normally required

Material Quantity:to produce a finished product (including

allowances for waste and inefficiency.

Standard Directtotal delivered cost, after subtracting any

Material Price:purchase discounts.

Standard Directnumber of hours normally needed to

Labor Quantity:manufacture one unit or product

Standard Directtotal hourly cost of compensation, including

Labor Rate:fringe benefits.

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)

Total Costs are broken down for Analysis

Direct Materials

Direct Labor

Variable Overhead

Fixed Overhead