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Standard Costing System. Chapter 4 Managerial Accounting Concepts and Empirical Evidence. Price. Material Variances. Quantity. Rate. Labor Variances. Efficiency. Spending. Overhead (Indirect Costs) Variances. Efficiency. Budget. Volume. Standard Costing Variances. Standard

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standard costing system

Standard CostingSystem

Chapter 4

Managerial Accounting

Concepts and Empirical Evidence

standard costing variances

Price

Material

Variances

Quantity

Rate

Labor

Variances

Efficiency

Spending

Overhead

(Indirect Costs)

Variances

Efficiency

Budget

Volume

Standard Costing Variances

Standard

Cost

Variances

data for standard cost ren corporation cutting dept
Standards

Normal level of production (per month) is 5000 desks

1 sheet of plywood/desk = $20.00 per desk@ $ 20.00 per sheet

2 direct labor hours/desk = $30.00 per desk@ $ 15.00 per hour

Indirect costs (2 hours/desk)Variable : $15,000 / 10,000 hours = $ 3.00 per desk Fixed : $5,000 / 10,000 hours = $ 1.00 per desk

Total Standard Costs = $ 54.00 per desk

Data for Standard CostRen Corporation, Cutting Dept.
data for standard cost ren corporation cutting dept4
Actuals

Number of desks produced 4,800

  • Sheets of plywood purchased 5,200
  • Sheets of plywood put into production 4,824
  • Direct labor hours worked 9,500
  • Plywood cost per sheet $ 21
  • Labor cost per hour $ 16
  • Indirect costs Variable $17,100 Fixed $ 4,900
Data for Standard CostRen Corporation, Cutting Dept.
analysis of differences variances between actuals and standards
Analysis of Differences (Variances) between Actuals and Standards,

Basic Parameters !!

  • Actual Quantity Purchased (AQ)
  • Actual Quantity put into Production (AU)
  • Actual Price (AP)
  • Standard Quantity Required (SQ)
  • Standard Price (SP)
analysis of differences variances between actuals and standards ren corporation cutting dept

3) 4,824 (AU) * $ 20 (SP) = $ 96,480

4) 4,800 (SQ) * $ 20 (SP) = $ 96,000

Analysis of Differences (Variances) between Actuals and Standards,Ren Corporation Cutting Dept

Materials

1) 5,200 (AQ) * $ 21 (AP) = $ 109,000

2) 5,200 (AQ) * $ 20 (SP) = $ 104,000

Price Variance (1-2) Unfavorable = $ 5,200

Quantity Variance(3-4) Unfavorable = $ 4,80

analysis of differences variances between actuals and standards ren corporation cutting dept7
Analysis of Differences (Variances) between Actuals and Standards,Ren Corporation Cutting Dept

Labor

1) 9,500 (AQ) * $ 16 (AP) = $ 152,000

2) 9,500 (AQ) * $ 15 (SP) = $ 142,500

Rate Variance (1-2) Unfavorable = $ 9,500

3) 9,600 (SQ) * $ 16 (SP) = $144,000

Efficiency Variance(2-3) Favorable = $ (1,500)

2 hrs Req. per desk * 4,800 desk

= 9,600 standard req. hrs for the level of production achieved

analysis of differences variances between actuals and standards ren corporation cutting dept8
Analysis of Differences (Variances) between Actuals and Standards,Ren Corporation Cutting Dept

Variable Overhead

1) 9,500 (AQ) * $ 1.80 (AP) = $ 17,100

2) 9,500 (AQ) * $ 1.50 (SP) = $ 14,250

Spending Variance(1-2) Unfavorable = $ 2,850

3) 9,600 (SQ) * $ 1.50 (SP) = $14,400

Efficiency Variance(2-3) Favorable = $ (150)

analysis of differences variances between actuals and standards ren corporation cutting dept9
Analysis of Differences (Variances) between Actuals and Standards,Ren Corporation Cutting Dept

Fixed Overhead

1) Actual fixed overhead = $ 4,900

2) Budgeted Fixed overhead = $ 5,000

Budget Variance (1-2) Favorable = $ (100)

3) Standard Fixed overhead = $4,800 for the level of production achieved ($ 0.50 * 9,600)

Volume Variance(2-3) unfavorable = $ 200