Standard Costing System

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# Standard Costing System - PowerPoint PPT Presentation

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 CostingSystem

Chapter 4

Managerial Accounting

Concepts and Empirical Evidence

Price

Material

Variances

Quantity

Rate

Labor

Variances

Efficiency

Spending

(Indirect Costs)

Variances

Efficiency

Budget

Volume

Standard Costing Variances

Standard

Cost

Variances

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.
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.

Basic Parameters !!

• Actual Quantity Purchased (AQ)
• Actual Quantity put into Production (AU)
• Actual Price (AP)
• Standard Quantity Required (SQ)
• Standard Price (SP)

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 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 Dept

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 Dept