Chap 008

Flexible Budgets,
Standard Costs, and

Variance Analysis
Chapter 08
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin
Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Variance Analysis Cycle

Identify
questions
Receive
explanations
Take
corrective
actions
Conduct next
periods
operations
Analyze
variances
Prepare standard
cost performance
report
Begin
8-2
Characteristics of Flexible Budgets

Planning budgets
are prepared for
a single, planned
level of activity.
Hmm! Comparing
static planning budgets
with actual costs
is like comparing
apples and oranges.
Performance
evaluation is difficult
when actual activity
differs from the planned
level of activity.
8-3
Characteristics of Flexible Budgets

May be prepared for any activity
level in the relevant range.
Show costs that should have been
incurred at the actual level of
activity, enabling apples to apples
cost comparisons.
Help managers control costs.
Improve performance evaluation.
Lets look at Larrys Lawn Service.

8-4
Deficiencies of the Static Planning

Budget
Larrys
Larrys Lawn
Lawn Service
Service provides
provides lawn
lawn care
care in
in aa planned
planned
community
community where
where all
all lawns
lawns are
are approximately
approximately the
the same
same size.
size.
At
At the
the end
end of
of May,
May, Larry
Larry prepared
prepared his
his June
June budget
budget based
based on
on
mowing
mowing 500
500 lawns.
lawns. Since
Since all
all of
of the
the lawns
lawns are
are similar
similar in
in size,
size,
Larry
Larry felt
felt that
that the
the number
number of
of lawns
lawns mowed
mowed in
in aa month
month would
would
be
be the
the best
best way
way to
to measure
measure overall
overall activity
activity for
for his
his business.
business.
Larrys Budget
8-5

Budget
Larrys Planning Budget
8-6

Budget
Larrys Actual Results
8-7

Budget
Larrys Actual Results Compared with the Planning Budget
8-8

Budget

F = Favorable variance that occurs when actual
revenue is greater than budgeted revenue.
U = Unfavorable variance that occurs when

actual costs are greater than budgeted costs.
F = Favorable variance that occurs when
actual costs are less than budgeted costs.
8-9

Budget
Since these variances are unfavorable, has

Larry done a poor job controlling costs?
Since these variances are favorable, has
Larry done a good job controlling costs?
8-10

Budget
I dont think I
can answer the
questions using
a static budget.
Actual activity is above

planned activity.
So, shouldnt the variable
costs be higher if actual
activity is higher?
8-11

Budget
The
The relevant
relevant question
question is
is .. .. ..
How
How much
much of
of the
the cost
cost variances
variances are
are
due
due to
to higher
higher activity
activity and
and how
how much
much
are
are due
due to
to cost
cost control?
control?
To
To answer
answer the
the question,
question,
we
we must
must
the
the budget
budget to
to the
the
actual
actual level
level of
of activity.
activity.
8-12
How a Flexible Budget Works

To
a budget, we need to know that:
Total variable costs change
in direct proportion to
changes in activity.
Total fixed costs remain
unchanged within the

relevant range.
le
b
ria
a
V
Fixed
8-13
How a Flexible Budget Works

Lets prepare a
budget
for Larrys Lawn
Service.
8-14
Preparing a Flexible Budget

Larrys Flexible Budget
8-15
Revenue and Spending Variances

Flexible budget revenue
Actual revenue
The difference is a revenue variance.
Flexible budget cost
Actual cost
The difference is a spending variance.

8-16

Now, lets use
budgeting
concepts to compute revenue and

spending variances for Larrys Lawn
Service.
8-17

Larrys Flexible Budget Compared with the Actual Results
$1,750 favorable
revenue variance
8-18

Larrys Flexible Budget Compared with the Actual Results
Spending
variances
8-19
Flexible Budgets with Multiple Cost

Drivers
More than one cost
driver may be needed to
adequately explain all of
the costs in an organization.
The cost formulas used
to prepare a flexible
budget can be adjusted
to recognize multiple
cost drivers.
8-20

Drivers
Because
Because of
of the
the large
large unfavorable
unfavorable wages
wages and
and salaries
salaries spending
spending
variance,
variance, Larry
Larry decided
decided to
to add
add an
an additional
additional cost
cost driver
driver for
for
wages
wages and
and salaries.
salaries. The
The variance
variance is
is due
due primarily
primarily to
to the
the number
number
of
of hours
hours required
required for
for the
the additional
additional edging
edging and
and trimming.
trimming. So
So
Larry
Larry estimates
estimates the
the additional
additional hours
hours and
and builds
builds those
those hours
hours into
into
both
both his
his revenue
revenue and
and expense
expense budget
budget formulas.
formulas.
Larrys New Budget

8-21

Drivers
Larrys Budget Based on More than One Cost Driver
8-22
Standard Costs
Standards are benchmarks or norms for
measuring performance. In managerial accounting,
two types of standards are commonly used.
Quantity standards
specify how much of an
input should be used to
make a product or
provide a service.
Price standards
specify how much
should be paid for
each unit of the
input.
Examples: Firestone, Sears, McDonalds, hospitals,

construction, and manufacturing companies.
8-23
Setting Direct Materials Standards

Standard Price
per Unit
Standard Quantity
per Unit
Final, delivered
cost of materials,
net of discounts.
Summarized in
a Bill of Materials.
8-24
Setting Direct Labor Standards

Standard Rate
per Hour
Standard Hours
per Unit
Often a single
rate is used that reflects
the mix of wages earned.
Use time and

motion studies for
each labor operation.
8-25
Setting Variable Manufacturing

Overhead Standards
Price
Standard
Quantity
Standard
The rate is the

variable portion of the
predetermined overhead
rate.
The quantity is
the activity in the
allocation base for
predetermined overhead.
8-26
The Standard Cost Card

A standard cost card for one unit
of product might look like this:
Inputs
Direct materials
Direct labor
Variable mfg. overhead
Total standard unit cost
AxB
Standard
Quantity
or Hours
Standard
Price
or Rate
Standard
Cost
per Unit
3.0 lbs.
2.5 hours
2.5 hours
$ 4.00 per lb.

$
14.00 per hour
3.00 per hour
$
12.00
35.00
7.50
54.50
8-27
Using Standards in Flexible

Budgets
Standard costs per unit for direct materials, direct
labor, and variable manufacturing overhead can be
used to compute activity and spending variances.
Spending variances become more

useful by breaking them down into
quantity and price variances.
8-28
A General Model for Variance Analysis

Variance Analysis
Quantity Variance
Price Variance
Difference between
actual quantity and
standard quantity
Difference between
actual price and
standard price
8-29
Quantity and Price Standards

Quantity and price standards are
determined separately for two reasons:
The purchasing manager is responsible for raw
material purchase prices and the production manager
is responsible for the quantity of raw material used.
The buying and using activities occur at different times.

Raw material purchases may be held in inventory for a
period of time before being used in production.
8-30

Variance Analysis
Quantity Variance
Price Variance
Materials quantity variance

Labor efficiency variance
VOH efficiency variance
Materials price variance

Labor rate variance
VOH rate variance
8-31
(1)
Standard Quantity
Allowed for Actual Output,
at Standard Price
(SQ SP)
(2)
Actual Quantity
of Input,
at Standard Price
(AQ SP)
Quantity Variance
(2) (1)
(3)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
Price Variance
(3) (2)
Spending Variance
(3) (1)
8-32

Actual quantity is the amount of direct materials, direct
labor, and variable manufacturing overhead actually used.
(1)
Standard Quantity
at Standard Price
(SQ SP)
(2)
Actual Quantity
of Input,
at Standard Price
(AQ SP)
Quantity Variance
(2) (1)
(3)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
Price Variance
(3) (2)
Spending Variance
(3) (1)
8-33

Standard quantity is the standard quantity allowed
for the actual output of the period.
(1)
Standard Quantity
at Standard Price
(SQ SP)
(2)
Actual Quantity
of Input,
at Standard Price
(AQ SP)
Quantity Variance
(2) (1)
(3)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
Price Variance
(3) (2)
Spending Variance
(3) (1)
8-34

Actual price is the amount actually
paid for the input used.
(1)
Standard Quantity
at Standard Price
(SQ SP)
(2)
Actual Quantity
of Input,
at Standard Price
(AQ SP)
Quantity Variance
(2) (1)
(3)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
Price Variance
(3) (2)
Spending Variance
(3) (1)
8-35

Standard price is the amount that should
have been paid for the input used.
(1)
Standard Quantity
at Standard Price
(SQ SP)
(2)
Actual Quantity
of Input,
at Standard Price
(AQ SP)
Quantity Variance
(2) (1)
(3)
Actual Quantity
of Input,
at Actual Price
(AQ AP)
Price Variance
(3) (2)
Spending Variance
(3) (1)
8-36
Materials Variances An Example

Glacier Peak Outfitters has the following direct
materials standard for the fiberfill in its mountain
parka.
0.1 kg. of fiberfill per parka at $5.00 per kg.
Last month 210 kgs. of fiberfill were purchased and
used to make 2,000 parkas. The materials cost a
total of $1,029.
8-37
Materials Variances Summary

Standard Quantity
Standard Price
200 kgs.
$5.00 per kg.

= $1,000
Actual Quantity
Standard Price
210 kgs.
$5.00 per kg.

= $1,050
Quantity variance
$50 unfavorable
Actual Quantity
Actual Price
210 kgs.
$4.90 per kg.

= $1,029
Price variance
$21 favorable
8-38

Standard Quantity
Standard Price
Actual Quantity
Standard Price
Actual Quantity
Actual Price
200 kgs.
210 kgs.
210 kgs.
0.1 kg per parka 2,000 parkas
= 200 kgs
$5.00 per kg.
$5.00 per kg.
$4.90 per kg.
= $1,000
= $1,050
Quantity variance
$50 unfavorable
= $1,029
Price variance
$21 favorable
8-39

Standard Quantity
Standard Price
200 kgs.
$5.00 per kg.

= $1,000
Actual Quantity
Standard Price
210 kgs.
210 kgs
$1,029
$5.00
per kg.
= $4.90
per kg
= $1,050
Quantity variance
$50 unfavorable
Actual Quantity
Actual Price
210 kgs.
$4.90 per kg.

= $1,029
Price variance
$21 favorable
8-40
Materials Variances:
Using the Factored Equations
Materials quantity variance
MQV = (AQ SP) (SQ SP)
= SP(AQ SQ)
= $5.00/kg (210 kgs (0.1 kg/parka 2,000 parkas))
= $5.00/kg (210 kgs 200 kgs)
= $5.00/kg (10 kgs) = $50 U
Materials price variance

MPV = (AQ AP) (AQ SP)
= AQ(AP SP)
= 210 kgs ($4.90/kg $5.00/kg)
= 210 kgs ( $0.10/kg) = $21 F
8-41
Responsibility for Materials

Variances
Materials Quantity Variance
Production Manager
Materials Price Variance
Purchasing Manager
The standard price is used to compute the quantity variance

so that the production manager is not held responsible for
the purchasing managers performance.
8-42
Responsibility for Materials

Variances
Your poor scheduling
I am not responsible for

this unfavorable materials
quantity variance.
You purchased cheap
material, so my people
had to use more of it.
Production Manager
sometimes requires me to
rush order materials at a
higher price, causing
unfavorable price variances.
Purchasing Manager
8-43
Labor Variances An Example

Glacier Peak Outfitters has the following direct labor
standard for its mountain parka.
1.2 standard hours per parka at $10.00 per hour
Last month, employees actually worked 2,500 hours
at a total labor cost of $26,250 to make 2,000
parkas.
8-44
Labor Variances Summary

Standard Hours
Standard Rate
Actual Hours
Standard Rate
Actual Hours
Actual Rate
2,400 hours
$10.00 per hour
2,500 hours
$10.00 per hour
2,500 hours
$10.50 per hour
= $24,000
= $25,000
= $26,250
Efficiency variance
$1,000 unfavorable
Rate variance
$1,250 unfavorable
8-45

Standard Hours
Standard Rate
2,400 hours
$10.00 per hour

= $24,000
Actual Hours
Standard Rate
Actual Hours
Actual Rate
2,500 hours
2,500 hours
1.2 hours per parka 2,000
parkasper
= 2,400
$10.00
hour hours$10.50 per hour
= $25,000
Efficiency variance
$1,000 unfavorable
= $26,250
Rate variance
$1,250 unfavorable
8-46

Standard Hours
Standard Rate
Actual Hours
Standard Rate
Actual Hours
Actual Rate
2,400 hours
2,500 hours
hours
$26,250 2,500
$10.00 per hour = $10.50
$10.00per
perhour
hour
2,500 hours
$10.50 per hour
= $24,000
= $25,000
Efficiency variance
$1,000 unfavorable
= $26,250
Rate variance
$1,250 unfavorable
8-47
Labor Variances: Using the Factored

Equations
Labor efficiency variance
LEV = (AH SR) (SH SR)
= SR (AH SH)
= $10.00 per hour (2,500 hours 2,400 hours)
= $10.00 per hour (100 hours)
= $1,000 unfavorable
Labor rate variance

LRV = (AH AR) (AH SR)
= AH (AR SR)
= 2,500 hours ($10.50 per hour $10.00 per hour)
= 2,500 hours ($0.50 per hour)
8-48
Responsibility for Labor Variances

Production managers are
usually held accountable
for labor variances
because they can
influence the:
Mix of skill levels

assigned to work tasks.
Level of employee
motivation.
Quality of production
supervision.
Production Manager
Quality of training
provided to employees.
8-49
Responsibility for Labor Variances

I am not responsible for
the unfavorable labor
efficiency variance!
You purchased cheap
material, so it took more
time to process it.
I think it took more time

to process the
materials because the
Maintenance
Department has poorly
maintained your
equipment.
8-50
Variable Manufacturing Overhead

Variances An Example
variable manufacturing overhead labor standard for
its mountain parka.
1.2 standard hours per parka at $4.00 per hour
Last month, employees actually worked 2,500 hours
to make 2,000 parkas. Actual variable
manufacturing overhead for the month was
$10,500.
8-51

Variances Summary
Standard Hours
Standard Rate
2,400 hours
$4.00 per hour

= $9,600
Actual Hours
Standard Rate
2,500 hours
$4.00 per hour

= $10,000
Efficiency variance
$400 unfavorable
Actual Hours
Actual Rate
2,500 hours
$4.20 per hour

= $10,500
Rate variance
$500 unfavorable
8-52

Variances Summary
Standard Hours
Actual Hours
Actual Hours
Standard Rate
Standard Rate
Actual Rate
2,400 hours
2,500 hours
2,500 hours
1.2 hours per parka 2,000

$4.00 per hour
$4.00 per
hour hours $4.20 per hour
parkas
= 2,400
= $9,600
= $10,000
Efficiency variance
$400 unfavorable
= $10,500
Rate variance
$500 unfavorable
8-53

Variances Summary
Standard Hours
Actual Hours
Standard Rate
Standard Rate
2,400 hours
2,500 hours
$10,500 2,500
hours
$4.00 per hour
$4.00 per
per hour
hour
= $4.20
= $9,600
= $10,000
Efficiency variance
$400 unfavorable
Actual Hours
Actual Rate
2,500 hours
$4.20 per hour

= $10,500
Rate variance
$500 unfavorable
8-54

Variances: Using Factored Equations
Variable manufacturing overhead efficiency variance
VMEV = (AH SR) (SH SR)
= SR (AH SH)
= $4.00 per hour (2,500 hours 2,400 hours)
= $4.00 per hour (100 hours)
= $400 unfavorable
Variable manufacturing overhead rate variance

VMRV = (AH AR) (AH SR)
= AH (AR SR)
= 2,500 hours ($4.20 per hour $4.00 per hour)
= 2,500 hours ($0.20 per hour)
= $500 unfavorable
8-55
Materials VariancesAn Important

Subtlety
The quantity variance

is computed only on
the quantity used.
The price variance is
computed on the entire
quantity purchased.
8-56

Subtlety
materials standard for the fiberfill in its mountain
parka.
0.1 kg. of fiberfill per parka at $5.00 per kg.
Last month 210 kgs. of fiberfill were purchased at a
cost of $1,029. Glacier used 200 kgs. to make
2,000 parkas.
8-57

Subtlety
Standard Quantity
Standard Price
200 kgs.
$5.00 per kg.

= $1,000
Actual Quantity
Standard Price
200 kgs.
$5.00 per kg.

= $1,000
Quantity variance
$0
8-58

Subtlety
Actual Quantity
Standard Price
210 kgs.
$5.00 per kg.

= $1,050
Actual Quantity
Actual Price
210 kgs.
$4.90 per kg.

= $1,029
Price variance
$21 favorable
8-59
Variance Analysis and Management by

Exception
How do I know
which variances to
investigate?
Larger variances, in
dollar amount or as
a percentage of the
standard, are
investigated first.
8-60
Advantages of Standard Costs

Management by
exception
Promotes economy
and efficiency
Advantages
Simplified
bookkeeping
Enhances
responsibility
accounting
8-61
Potential Problems with Standard

Costs
Emphasizing standards
may exclude other
important objectives.
Standard cost
reports may
not be timely.
Invalid assumptions
about the relationship
between labor
cost and output.
Potential
Problems
Favorable
variances may
be misinterpreted.
Emphasis on
negative may
impact morale.
Continuous
improvement may
be more important
than meeting standards.
8-62
PREDETERMINED OVERHEAD
RATES AND OVERHEAD
ANALYSIS IN A STANDARD
COSTING
SYSTEM
Appendix 8A
PowerPoint Authors:
McGraw-Hill/Irwin
Fixed Overhead Volume Variance

Fixed
Overhead
Applied
Budgeted
Fixed
Overhead
Actual
Fixed
Overhead
Volume
variance
Volume
variance
Budgeted
fixed
overhead
Fixed
overhead
applied to
work in process
8-64
Fixed Overhead Volume Variance

Fixed
Overhead
Applied
Budgeted
Fixed
Overhead
DH FR
SH FR
Actual
Fixed
Overhead
Volume
variance
Volume variance
FPOHR (DH SH)
FPOHR = Fixed portion of the predetermined overhead rate

DH = Denominator hours
SH = Standard hours allowed for actual output
8-65
Fixed Overhead Budget Variance

Fixed
Overhead
Applied
Budgeted
Fixed
Overhead
Actual
Fixed
Overhead
Budget
variance
Budget
variance
Actual
fixed
overhead
Budgeted
fixed
overhead
8-66
Computing Fixed Overhead Variances
8-67
Computing Fixed Overhead Variances
8-68
Predetermined Overhead Rates

Predetermined
Estimated total manufacturing overhead cost
=
overhead rate
Estimated total amount of the allocation base
Predetermined
$360,000
=
overhead rate
90,000 Machine-hours
Predetermined
= $4.00 per machine-hour
overhead rate
8-69
Predetermined Overhead Rates

Variable component of the
predetermined overhead rate
$90,000
=
Variable component of the

Fixed component of the

$270,000
=
Fixed component of the

8-70
Applying Manufacturing Overhead

Overhead
applied
Predetermined
overhead rate
Standard hours allowed

for the actual output
Overhead
applied
$4.00 per
machine-hour
84,000 machine-hours
Overhead
applied
$336,000
8-71
Computing the Volume Variance

Budgeted
fixed
overhead
Fixed
overhead
applied to
work in process
Volume
variance
Volume
variance
= $270,000
Volume
variance
= $18,000 Unfavorable
$3.00 per
$84,000
machine-hour
machine-hours
8-72
Computing the Volume Variance

Volume variance
FPOHR (DH SH)
FPOHR = Fixed portion of the predetermined overhead rate

DH = Denominator hours
SH = Standard hours allowed for actual output
$3.00 per
machine-hour
90,000
84,000
mach-hours
mach-hours
Volume
variance
Volume
variance
= 18,000 Unfavorable
8-73
Computing the Budget Variance

Actual
fixed
overhead
Budgeted
fixed
overhead
Budget
variance
Budget
variance
$280,000 $270,000
Budget
variance
$10,000 Unfavorable
8-74
A Pictorial View of the Variances

Fixed Overhead
Applied to
Work in Process
252,000
Budgeted
Fixed
Overhead
270,000
Volume variance,
$18,000 unfavorable
Actual
Fixed
Overhead
280,000
Budget variance,
$10,000 unfavorable
Total variance, $28,000 unfavorable

8-75
Fixed Overhead Variances

A Graphic Approach
Lets look at a
graph showing
fixed overhead
variances. We will
use ColaCos
numbers from the
previous example.
8-76
Graphic Analysis of Fixed

Overhead Variances
Budget
$270,000
t
a
d
lie
r
p
u
p
o
a
h
d
d
a
r
e
a
d
rh
n
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v
a
t
o
s
d
r
e
e
x
p
Fi
0
.0
3
$
Denominator
hours
0
0
Machine-hours (000)
90
8-77

Overhead Variances
Actual
$280,000
Budget
$270,000
Budget Variance 10,000 U
t
a
d
lie
r
p
u
p
o
a
h
d
d
a
r
e
a
d
rh
n
e
v
a
t
o
s
d
r
e
e
x
p
Fi
0
.0
3
$
Denominator
hours
0
0
Machine-hours (000)
90
8-78

Overhead Variances
Actual
$280,000
Budget
$270,000
Applied
$252,000
{
{
Budget Variance 10,000 U

Volume Variance 18,000 U
t
a
d
lie
r
p
u
p
o
a
h
d
d
a
r
e
a
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rh
n
e
v
a
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d
r
e
e
x
p
Standard
Fi
0
.0
hours
3
$
Denominator
hours
0
0
Machine-hours (000)
84
90
8-79
Reconciling Overhead Variances and

Underapplied or Overapplied Overhead
In a standard
cost system:
Favorable
variances are equivalent
to overapplied overhead.
The sum of the overhead variances

equals the under- or overapplied
overhead cost for the period.
8-80
Reconciling Overhead Variances and

Underapplied or Overapplied Overhead
8-81
Computing the Variable Overhead

Variances
Variable manufacturing overhead efficiency variance
VMEV = (AH SR) (SH SR)
= $88,000 (84,000 hours $1.00 per hour)
8-82
Computing the Variable Overhead

Variances
Variable manufacturing overhead rate variance
VMRV = (AH AR) (AH SR)
= $100,000 (88,000 hours $1.00 per hour)
8-83
Computing the Sum of All

Variances
8-84
GENERAL LEDGER ENTRIES

TO RECORD VARIANCES
Appendix 8B
PowerPoint Authors:
McGraw-Hill/Irwin
Glacier Peak Outfitters Revisited

We will use information from the Glacier Peak Outfitters
example presented earlier in the chapter to illustrate journal
entries for standard cost variances. Recall the following:
Material
AQ AP = $1,029
AQ SP = $1,050
SQ SP = $1,000
MPV = $21 F
MQV = $50 U
Labor
AH AR = $26,250
AH SR = $25,000
SH SR = $24,000
LRV = $1,250 U
LEV = $1,000 U
Now, lets prepare the entries to record

the labor and material variances.
8-86
Recording Materials Variances
8-87
Recording Labor Variances
8-88
Cost Flows in a Standard Cost System

Inventories are recorded at standard cost.
Variances are recorded as follows:
Favorable variances are credits, representing
savings in production costs.
Unfavorable variances are debits, representing
excess production costs.
Standard cost variances are usually closed out

to cost of goods sold.
Unfavorable variances increase cost of goods sold.
Favorable variances decrease cost of goods sold.
8-89
End of Chapter 08
8-90

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Flexible Budgets,

Standard Costs, and

Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Variance Analysis Cycle

Characteristics of Flexible Budgets

Characteristics of Flexible Budgets

Lets look at Larrys Lawn Service.

Deficiencies of the Static Planning

Deficiencies of the Static Planning

Deficiencies of the Static Planning

Deficiencies of the Static Planning

Larrys Actual Results Compared with the Planning Budget

Deficiencies of the Static Planning

Larrys Actual Results Compared with the Planning Budget

U = Unfavorable variance that occurs when

Deficiencies of the Static Planning

Larrys Actual Results Compared with the Planning Budget

Since these variances are unfavorable, has

Deficiencies of the Static Planning

Actual activity is above

Deficiencies of the Static Planning

How a Flexible Budget Works

a budget, we need to know that:

Total variable costs change

unchanged within the

How a Flexible Budget Works

Preparing a Flexible Budget

Revenue and Spending Variances

The difference is a revenue variance.

Flexible budget cost

The difference is a spending variance.

Revenue and Spending Variances

concepts to compute revenue and

Revenue and Spending Variances

Revenue and Spending Variances

Flexible Budgets with Multiple Cost

Flexible Budgets with Multiple Cost

Larrys New Budget

Flexible Budgets with Multiple Cost

Larrys Budget Based on More than One Cost Driver

Examples: Firestone, Sears, McDonalds, hospitals,

Setting Direct Materials Standards

Setting Direct Labor Standards

Use time and

Setting Variable Manufacturing

The rate is the

The Standard Cost Card

$ 4.00 per lb.

Using Standards in Flexible

Spending variances become more

A General Model for Variance Analysis

Quantity and Price Standards

The buying and using activities occur at different times.

A General Model for Variance Analysis

Materials quantity variance

Materials price variance

A General Model for Variance Analysis

A General Model for Variance Analysis

A General Model for Variance Analysis

A General Model for Variance Analysis

A General Model for Variance Analysis

Materials Variances An Example

Materials Variances Summary

$5.00 per kg.