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Managerial Accounting Second Edition Weygandt / Kieso / Kimmel. Prepared by:. Ellen L. Sweatt. Georgia Perimeter College. ELS. Performance Evaluation Through Standard Costs. Standards. Are common in business Those imposed by government are regulations Fair Labor Standards Act
Ellen L. Sweatt
Georgia Perimeter College
A standard is a unit amount.
A budget is a total amount.
Requires input from all persons who have responsibility for costs and quantities.
Standards based on the optimum level of performance under perfect operating conditions.
Standards based on an efficient level of performance that are attainable under expected operating conditions.
Should be rigorous but attainable.
Purchase price, net of discounts $2.70Freight .20Receiving and handling .10Standard direct materials price per pound$3.00Direct Materials Price Standard
The cost per unit of direct materials that should be incurred, including amounts for related costs such as receiving, storing, handling.
The hours that should have been worked for the units produced.
With standard costs, manufacturing overhead costs are applied to work in process on the basis of standard hours allowed.
An overhead rate determined by dividing budgeted overhead costs by an expected standard activity index.
The difference between total actual costs and total standard costs.
The difference between the actual quantity times the actual price and the standard quantity times the standard price of materials.
The difference between the actual quantity times the actual price and the actual quantity times the standard price for material.
The difference between the actual quantity times the standard price and the standard quantity times the standard price for materials.
The difference between actual hours times the actual rate and standard hours times the standard rate for labor.
The difference between the actual hours times the actual rate and the actual hours times the standard rate for labor.
The difference between the actual hours times the standard rate and the standard hours times the standard rate for labor.
The difference between actual overhead incurred and overhead budgeted for the standard hours allowed.
The difference between overhead budgeted for the standard hours allowed and the overhead applied.
The difference between actual overhead costs and overhead costs applied to work done.
Variance Report - Purchasing Department
For the Week June 8, 2002
Type of Quantity Actual Standard Price
Materials Purchased Price Price Variance Explanation
x 100 4,200 lbs. $3.10 $3.00 $420 U Rush order
x 142 1,200 units 2.75 2.80 60 F Quantity discount
x 85 600 doz. 5.20 5.10 60 U Regular supplier
on strike Total price variance $420 UReporting Variances
Xonic, Inc.Income StatementFor the Month Ended June 30, 2002
Cost of goods sold (at standard) 42,000
Gross profit (at standard) 18,000
Materials price 420
Materials quantity 600
Labor price (420)
Labor quantity 1,000
Overhead controllable 500
Overhead volume 400
Total variance unfavorable 2,500
Gross profit (actual) 15,500
Selling and administrative expenses 3,000
Net income $12,500Statement Presentation of Variances