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N12401
Lecture 3
Standard Costing: Additional Variances
by Hung Woan-Ting
Learning Objectives
1.
2.
3.
Meal (P*Q)
Laundry (P*Q)
Care time (P*Q)
Lab test (P*Q)
Medicine (P*Q)
Engine (P*Q)
Valve (P*Q)
Fuel Tank (P*Q)
Brake (P*Q)
Headlamp (P*Q)
Wheel (P*Q)
Audio (P*Q)
Standard
Cost Card
Standard
Cost Card
Standard
Cost Card
Manufacturing costs
Cost competiveness
Assembly line defect rate
Material Costs
Labour Costs
Total
Costs
PRODUCT
Non-manufacturing costs
5
DIRECT
LABOUR
COST
DIRECT
MATERIAL
COST
FIXED
OH
VARIABLE
OH
VARIABLE
COSTS
FIXED
COSTS
ANALYSIS
ANALYSIS
Std Rate
= __ per hr
Managerial
implications
??
10
(absorbed) into
(external financial reporting regulation; pricing; etc.)
products
11
12
= 350 (
Managerial
implications
??
13
Product Cost
Product Cost
14
Product Cost
Direct Material
Direct Labour
Variable MOH
15
Product Cost
Direct Labour
Variable MOH
Fixed MOH
16
Example:
How is the current use of capacity?
Any idle capacity?
$ ?
17
Flexible
Budget
BV
AV
AV
*SH
@ SR
*AH
@ SR
* SH
@ SR
Variance due to
capacity usage
Actual
Results
Managerial
implications
??
18
Flexible
Budget
BV
AV
AV
*SH
@ SR
*AH
@ SR
* SH
@ SR
Variance due to
labour efficiency
Managerial
implications
??
Actual
Results
19
Ex-post analysis
approach
~ reflect changes in anticipated
environment (Demski, 1977)
Total Variances
20
Ex-post standard
Planning
Variance
Operating
Variance
Actual outcome
Managerial
implications
??
21
Planning variances
Material Price Planning variance
= (__- __)*3kg*1000units
= __ (_)
Operational variances
Mat Price Variance
= (__- __)*2800kg
= __ (_)
Mat Usage Variance
= (3kg*900units 2800kg)* __
= __ (_)
22
Readings
GNBCY Ch12
D Ch17, Ch18
Cheatham & Cheatham (1996) Re-designing Cost
Systems: Is Standard Costing Obsolete?, Accounting
Horizons, Dec, Vol 10(4): 23-31
Johnsen & Sopariwala (2000) Standard Costing is Alive
and Well at Parker Brass, Management Accounting
Quarterly, Winter, Vol 1(2): 1-9.
KPMG (2010) Standard costing: Insights from leading
companies, in association with CIMA.
End of Lecture
23
Exe.
Seminar 1 preparation
Attempt the Questions Set
(at the back of this handout)