7: Standard Costs and Variances

Year level / Semester 3rd year 1st sem

subject

nature of topic theory+problem

notes app

stage understanding

ref. materials

RRT | recall level poor recall

RRT | Last studied @October 11, 2022

RRT | remarks

Created @September 20, 2022 2:32 PM

󾠮 understanding stage (read with the intention of understanding(not memorizing

bec u will eventually remember in the next stage)

Turn the content to active recall questions

watch recorded lecture(Sept. 21)

Materials used 🥑
Primary
1.

daigler materials, check current topic

book - since ang basis ng daigler discussions ni maam ay sa

book lang din, use book as reference pag may di gets
tip: ss the PPT then image occlude to save time

7: Standard Costs and Variances 1

 Secondary
2. (to strengthen the connections from the primary)

󾠯 test yourself repeatedly (since na understand mo naman na, ang goal nito is
para mabilis nalang ang pagsagot. parang yung understanding mo of something eh
magttrigger pagdating sa exam(since exams is a matter of speed and accuracy)

test yourself repeatedly with the active recall questions you made

interleave your practice of problems and assess using RRT

7: Standard Costs and Variances: answer foundational, 12-5, 12-9, 12-10,

12a-6

Quiz(PAAs)

Self-test questions
important formulas

fixed overhead volume variance = budgeted fixed overhead cost - (standard

rate per hour

fixed overhead budget variance = budgeted fixed overhead cost - actual fixed
overhead cost

variable overhead efficiency variance = standard rate per hour (actual labor
hours - standard labor hours)

variable overhead rate variance = (actual labor hours*standard rate per hour) -
(actual labor hours*actual rate per hour)

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 direct labor efficiency variance = standard rate per hour (actual labor hours -
standard labor hours)

direct labor rate variance = (actual labor hours*actual rate per hour) - (actual
labor hours*standard rate per hour)

direct material quantity variance = standard price (actual quantity - standard

quantity)

direct material price variance = actual quantity (standard price - actual price)

TO-MASTER/do-not-know list (jic may lapses ka na need i-master)

Recorded discussion

7: Standard Costs and Variances 3

 This is a list that shows the quantity of each type of material in a unit of finished
product

bill of materials

the standard rate per hour includes not only the wages earned but also fringe benefits and other
labor costs

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 Variance analysis - act of computing and interpreting variances

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 general model for variance analysis

Note: same computation for either price or quantity variances

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 equation form (mas prefer ko -febbie)

material variances example

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 traditional method

analysis: quantity standard = .1kg of fiberfill per parka; price standard = 5/kg

standard > actual means favorable; actual > standard means unfavorable

equation form

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 isolation of material variances

common practice:

1. purchase the materials

2. compute for the materials price variance (The price variance is computed on
the entire quantity purchased)

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 1. use the materials for production

2. compute for the materials quantity variance (The quantity variance is

computed only on the quantity used.)

responsibility for material variances

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 possible reasons bakit yung di dapat responsibility ng purchasing
manager/production manager ay nagiging responsibility nila:

unfavorable variance resulted to an unscheduled production(by the

production manager) that required an express delivery of raw materials(by
the purchasing manager)—so kahit hindi responsibility ni purchasing
manager ang scheduling, nagiging responsibility na rin nila

purchasing manager ordered low quality raw mats(nagtitipid) so kahit

maayos ang scheduling, kakailanganin na gumamit ng production
manager ng more of raw mats (so responsibility na to ng purchasing
manager)
pag low quality ang raw mats, pwedeng gawin is maghanap ng new supplier

bakit naghahanap ng variance

to improve the operations of the biz, not to attack

Compute the direct labor rate and efficiency variances and explain their
significance.

labor variance example

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 responsibility for labor variances

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 possible reasons bakit yung di dapat responsibility ng purchasing
manager/production manager ay nagiging responsibility nila:

maintenance dept(hawak ng production manager) has done a poor job

in maintenance of production equipment which increases processing
time

purchasing manager ordered low quality raw mats(nagtitipid) so kahit

maayos ang equipment, kakailanganin na gumamit ng production

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 manager ng more labor hours (so responsibility na to ng purchasing
manager)

Compute the variable manufacturing overhead rate and efficiency variances.

Variable Manufacturing Overhead Variances —Example

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 How do I know which variances to investigate?

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 depende sa sinet ng entity ie. +500(favorable limit), -500(unfavorable limit) —if sumobra
sa limit, may variance na

advantages of standard costs

disadvantages of standard costs

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 Compute and interpret the fixed overhead budget and volume variances.

how to compute fixed overhead budget variance?

how to compute fixed overhead volume variance?

7: Standard Costs and Variances 19

 sample prob

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 Reconciling overhead variances and underapplied or overapplied overhead

variable overhead variances: the line by line method

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 compute the sum of all variances

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