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276436
276436
PowerPoint Presentation by
MANAGEMENT
ACCOUNTING
Gail B. Wright
Professor Emeritus of Accounting
Bryant University
8th EDITION
BY
HANSEN & MOWEN
9 STANDARD COSTING
1
LEARNING
LEARNING OBJECTIVES
OBJECTIVES
1. Tell how unit standards are set; why
standard costing systems are adopted.
2. State the purpose of a standard cost sheet.
3. Describe basic concepts underlying
variance analysis & explain how they are
used for control.
Continued
2
LEARNING
LEARNING OBJECTIVES
OBJECTIVES
4. Compute materials & labor variances;
explain how they are used for control.
5. Calculate variable & fixed overhead
variances & give their definitions.
6. Prepare journal entries for variances
(Appendix).
LO 1
QUANTITY
QUANTITY STANDARDS:
STANDARDS:
Definition
Definition
LO 1
PRICE
PRICE STANDARDS:
STANDARDS: Definition
Definition
LO 1
Quantity
Quantity standards come from
experience, studies, & personnel.
Price
Price standards come from
operations, purchasing, personnel,
& accounting.
6
LO 1
LO 1
product
costing
For product
costing
To use unit cost system that is readily available in
pricing
LO 2
STANDARD
STANDARD COST
COST PER
PER UNIT:
UNIT:
Definition
Definition
LO 3
TOTAL
TOTAL BUDGET
BUDGET VARIANCE:
VARIANCE:
Definition
Definition
10
LO 3
11
LO 3
LO 2
EXHIBIT 9-2
13
LO 3
Total Variance
= (AP X AQ) (SP X SQ)
= Actual price x Actual quantity
Standard Price x Standard Quantity
14
LO 3
LO 4
MATERIALS VARIANCES
Decompose total
materials variance
into price & usage
variances.
EXHIBIT 9-6
16
LO 4
Purchasing
agent Agent.
The Purchasing
17
LO 4
MUV
= (AQ X SP) (SQ X SP)
= (AQ SQ)SP
= (780,000 873,000) $0.006
= $ 558 F
18
LO 4
LRV
= (AH X AR) (AH X SR)
= (AR SR)AH
= ($7.35 - $7.00) 360
= $ 126 U
19
LO 4
20
LO 5
LO 5
VARIABLE OVERHEAD
SPENDING VARIANCE
Variable
Variable overhead
overhead spending
spending variance
variance
arises
arises because
because prices
prices change.
change. ItIt
includes
includes things
things such
such as
as indirect
indirect
materials,
materials, indirect
indirect labor,
labor, electricity
electricity
maintenance,
maintenance, etc.
etc. Increase
Increase or
or decrease
decrease
in
in these
these items
items is
is beyond
beyond control
control of
of
managers.
managers.
22
LO 5
Efficiency Variance
= (AH SH)SVOR
= (400 378.3) $3.85
= $ 84 U
23
LO 5
EXHIBIT 9-11
24
LO 5
LO 5
Volume Variance
= Budgeted Applied fixed overhead
= $479,970 - $687,473
= $62,497 U
26
CHAPTER 9
THE
THE END
END
27