0 valutazioniIl 0% ha trovato utile questo documento (0 voti)

3 visualizzazioni108 paginecost accounting

Mar 12, 2018

StandardCosting 101

© © All Rights Reserved

PPT, PDF, TXT o leggi online da Scribd

cost accounting

© All Rights Reserved

0 valutazioniIl 0% ha trovato utile questo documento (0 voti)

3 visualizzazioni108 pagineStandardCosting 101

cost accounting

© All Rights Reserved

Sei sulla pagina 1di 108

Performance Measures

Standard Costs

Standards are benchmarks or “norms” for

measuring performance. In managerial accounting,

two types of standards are commonly used.

specify how much of an specify how much

input should be used to should be paid for

make a product or each unit of the

provide a service. input.

construction and manufacturing companies.

Standard Costs

Deviations from standards deemed significant

are brought to the attention of management, a

practice known as management by exception.

Standard

Amount

Direct

Material

Direct Manufacturing

Labor Overhead

Variance Analysis Cycle

Take

Identify Receive corrective

questions explanations actions

Conduct next

Analyze period’s

variances operations

Prepare standard

Begin

cost performance

report

Setting Standard Costs

agents, and production managers

combine efforts to set standards that encourage

efficient future operations.

Setting Standard Costs

Should we use I recommend using practical

ideal standards that standards that are currently

require employees to attainable with reasonable

work at 100 percent and efficient effort.

peak efficiency?

Learning Objective 1

materials standards

and direct labor

standards are set.

Setting Direct Material Standards

Price Quantity

Standards Standards

cost of materials, a Bill of Materials.

net of discounts.

Setting Standards

eliminate all defects and waste, rather than

continually build them into standards.

spoilage that are built into standards

should be reduced over time.

Setting Direct Labor Standards

Rate Time

Standards Standards

rate is used that reflects motion studies for

the mix of wages earned. each labor operation.

Setting Variable Manufacturing Overhead

Standards

Rate Quantity

Standards Standards

variable portion of the the activity in the

predetermined overhead allocation base for

rate. predetermined overhead.

Standard Cost Card – Variable Production

Cost

of product might look like this:

A B AxB

Standard Standard Standard

Quantity Price Cost

Inputs or Hours or Rate per Unit

Direct materials 3.0 lbs. $ 4.00 per lb. $ 12.00

Direct labor 2.5 hours 14.00 per hour 35.00

Variable mfg. overhead 2.5 hours 3.00 per hour 7.50

Total standard unit cost $ 54.50

Price and Quantity Standards

determined separately for two reasons:

material purchase prices and the production manager

is responsible for the quantity of raw material used.

Raw material purchases may be held in inventory for a

period of time before being used in production.

A General Model for Variance Analysis

Variance Analysis

actual price and actual quantity and

standard price standard quantity

A General Model for Variance Analysis

Variance Analysis

Labor rate variance Labor efficiency variance

VOH rate variance VOH efficiency variance

A General Model for Variance Analysis

× × ×

Actual Price Standard Price Standard Price

A General Model for Variance Analysis

× × ×

Actual Price Standard Price Standard Price

materials, direct labor, and variable

manufacturing overhead actually used.

A General Model for Variance Analysis

× × ×

Actual Price Standard Price Standard Price

allowed for the actual output of the period.

A General Model for Variance Analysis

× × ×

Actual Price Standard Price Standard Price

paid for the input used.

A General Model for Variance Analysis

× × ×

Actual Price Standard Price Standard Price

have been paid for the input used.

A General Model for Variance Analysis

× × ×

Actual Price Standard Price Standard Price

AQ = Actual Quantity SP = Standard Price

AP = Actual Price SQ = Standard Quantity

Learning Objective 2

materials price and

quantity variances and

explain their

significance.

Material Variances – An Example

material standard for the fiberfill in its mountain

parka.

used to make 2,000 parkas. The material cost a

total of $1,029.

Material Variances Summary

× × ×

Actual Price Standard Price Standard Price

210 kgs. 210 kgs. 200 kgs.

× × ×

$4.90 per kg. $5.00 per kg. $5.00 per kg.

= $1,029 = $1,050 = $1,000

$21 favorable $50 unfavorable

Material Variances Summary

× × ×

Actual Price Standard Price Standard Price

210 kgs. 210 kgs. 200 kgs.

× × kgs

$1,029 210 ×

$4.90 per kg. $5.00per

= $4.90 perkg

kg. $5.00 per kg.

= $1,029 = $1,050 = $1,000

$21 favorable $50 unfavorable

Material Variances Summary

× × ×

Actual Price Standard Price Standard Price

210 kgs. 210 kgs. 200 kgs.

× 0.1 kg per parka× 2,000 parkas ×

$4.90 per kg. $5.00

= 200 per

kgs kg. $5.00 per kg.

= $1,029 = $1,050 = $1,000

$21 favorable $50 unfavorable

Material Variances:

Using the Factored Equations

MPV = AQ (AP - SP)

= 210 kgs ($4.90/kg - $5.00/kg)

= 210 kgs (-$0.10/kg)

= $21 F

Materials quantity variance

MQV = 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

Isolation of Material Variances

I need the price variance I’ll start computing

sooner so that I can better the price variance

identify purchasing problems. when material is

You accountants just don’t purchased rather

understand the problems that than when it’s used.

purchasing managers have.

Material Variances

Hanson purchased and

computed on the entire

used 1,700 pounds.

quantity purchased.

How are the variances

computed if the amount The quantity variance

purchased differs from is computed only on

the amount used? the quantity used.

Responsibility for Material Variances

so that the production manager is not held responsible for

the purchasing manager’s performance.

Responsibility for Material Variances

I am not responsible for sometimes requires me to

this unfavorable material rush order material at a

quantity variance. higher price, causing

unfavorable price variances.

You purchased cheap

material, so my people

had to use more of it.

Zippy

Quick Check

standard to manufacture one Zippy:

1.5 pounds per Zippy at $4.00 per pound

Last week, 1,700 pounds of material were

purchased and used to make 1,000 Zippies. The

material cost a total of $6,630.

Zippy

Quick Check

Hanson’s

Hanson’s material

material price

price variance

variance (MPV)

(MPV)

for

for the

the week

week was:

was:

a.

a. $170

$170 unfavorable.

unfavorable.

b.

b. $170

$170 favorable.

favorable.

c.

c. $800

$800 unfavorable.

unfavorable.

d.

d. $800

$800 favorable.

favorable.

Zippy

Quick Check

Hanson’s

Hanson’s material

material price

price variance

variance (MPV)

(MPV)

for

for the

the week

week was:

was:

a.

a. $170

$170 unfavorable.

unfavorable.

b.

b. $170

$170 favorable.

favorable.

c.

c. $800

$800 unfavorable.

unfavorable.

d. $800 favorable. MPV = AQ(AP - SP)

d. $800 favorable.MPV = 1,700 lbs. × ($3.90 - 4.00)

MPV = $170 Favorable

Zippy

Quick Check

Hanson’s

Hanson’s material

material quantity

quantity variance

variance (MQV)

(MQV)

for

for the

the week

week was:

was:

a.

a. $170

$170 unfavorable.

unfavorable.

b.

b. $170

$170 favorable.

favorable.

c.

c. $800

$800 unfavorable.

unfavorable.

d.

d. $800

$800 favorable.

favorable.

Zippy

Quick Check

Hanson’s

Hanson’s material

material quantity

quantity variance

variance (MQV)

(MQV)

for

for the

the week

week was:

was:

a.

a. $170

$170 unfavorable.

unfavorable.

b.

b. $170

$170 favorable.

favorable.

c.

c. $800

$800 unfavorable.

unfavorable.

d.

d. $800

$800 favorable.

favorable.

MQV = SP(AQ - SQ)

MQV = $4.00(1,700 lbs - 1,500 lbs)

MQV = $800 unfavorable

Zippy

Quick Check

× × ×

Actual Price Standard Price Standard Price

1,700 lbs. 1,700 lbs. 1,500 lbs.

× × ×

$3.90 per lb. $4.00 per lb. $4.00 per lb.

= $6,630 = $ 6,800 = $6,000

$170 favorable $800 unfavorable

Zippy

Quick Check Continued

manufacture one Zippy:

purchased at a total cost of $10,920, and 1,700

pounds were used to make 1,000 Zippies.

Zippy

Quick Check Continued

Purchased Purchased

× ×

2,800Price

Actual lbs. 2,800 lbs.

Standard Price

× ×

$3.90 per lb. $4.00 per lb.

= $10,920 = $11,200

Price variance because quantity

$280 favorable purchased increases.

Zippy

Quick Check Continued

Actual Quantity

Used Standard

Quantity

× ×

Standard Price Standard Price

1,700 lbs. 1,500 lbs.

× ×

$4.00 per lb. $4.00 per lb.

= $6,800 = $6,000

Quantity variance is

unchanged because

actual and standard Quantity variance

quantities are unchanged. $800 unfavorable

Learning Objective 3

labor rate and

efficiency variances

and explain

their significance.

Labor Variances – An Example

standard for its mountain parka.

at a total labor cost of $26,250 to make 2,000

parkas.

Labor Variances Summary

× × ×

Actual Rate Standard Rate Standard Rate

2,500 hours 2,500 hours 2,400 hours

× × ×

$10.50 per hour $10.00 per hour. $10.00 per hour

= $26,250 = $25,000 = $24,000

$1,250 unfavorable $1,000 unfavorable

Labor Variances Summary

× × ×

Actual Rate Standard Rate Standard Rate

2,500 hours 2,500 hours 2,400 hours

× $26,250× 2,500 hours ×

$10.50 per hour $10.00 per hour.

= $10.50 per hour $10.00 per hour

= $26,250 = $25,000 = $24,000

$1,250 unfavorable $1,000 unfavorable

Labor Variances Summary

× × ×

Actual Rate Standard Rate Standard Rate

2,500 hours 2,500 hours 2,400 hours

× ×

1.2 hours per parka 2,000 ×

$10.50 per hour parkas

$10.00 per hour.

= 2,400 hours $10.00 per hour

= $26,250 = $25,000 = $24,000

$1,250 unfavorable $1,000 unfavorable

Labor Variances:

Using the Factored Equations

LRV = AH (AR - SR)

= 2,500 hours ($10.50 per hour – $10.00 per hour)

= 2,500 hours ($0.50 per hour)

= $1,250 unfavorable

Labor efficiency variance

LEV = SR (AH - SH)

= $10.00 per hour (2,500 hours – 2,400 hours)

= $10.00 per hour (100 hours)

= $1,000 unfavorable

Responsibility for Labor Variances

usually held accountable assigned to work tasks.

for labor variances

because they can

Level of employee

influence the:

motivation.

Quality of production

supervision.

Quality of training

provided to employees.

Production Manager

Responsibility for Labor Variances

I think it took more time

to process the

I am not responsible for materials because the

the unfavorable labor Maintenance

efficiency variance! Department has poorly

maintained your

You purchased cheap equipment.

material, so it took more

time to process it.

Zippy

Quick Check

standard to manufacture one Zippy:

1.5 standard hours per Zippy at

$12.00 per direct labor hour

Last week, 1,550 direct labor hours were

worked at a total labor cost of $18,910

to make 1,000 Zippies.

Zippy

Quick Check

Hanson’s

Hanson’s labor

labor rate

rate variance

variance (LRV)

(LRV) for

for the

the

week

week was:

was:

a.

a. $310

$310 unfavorable.

unfavorable.

b.

b. $310

$310 favorable.

favorable.

c.

c. $300

$300 unfavorable.

unfavorable.

d.

d. $300

$300 favorable.

favorable.

Zippy

Quick Check

Hanson’s

Hanson’s labor

labor rate

rate variance

variance (LRV)

(LRV) for

for the

the

week

week was:

was:

a.

a. $310

$310 unfavorable.

unfavorable.

b.

b. $310

$310 favorable.

favorable.

c.

c. $300

$300 unfavorable.LRV = AH(AR - SR)

unfavorable.

LRV = 1,550 hrs($12.20 - $12.00)

d.

d. $300

$300 favorable.

favorable.LRV = $310 unfavorable

Zippy

Quick Check

Hanson’s

Hanson’s labor

labor efficiency

efficiency variance

variance (LEV)

(LEV)

for

for the

the week

week was:

was:

a.

a. $590

$590 unfavorable.

unfavorable.

b.

b. $590

$590 favorable.

favorable.

c.

c. $600

$600 unfavorable.

unfavorable.

d.

d. $600

$600 favorable.

favorable.

Zippy

Quick Check

Hanson’s

Hanson’s labor

labor efficiency

efficiency variance

variance (LEV)

(LEV)

for

for the

the week

week was:

was:

a.

a. $590

$590 unfavorable.

unfavorable.

b.

b. $590

$590 favorable.

favorable.

c.

c. $600

$600 unfavorable.

unfavorable.

d.

d. $600

$600 favorable.

favorable.

LEV = SR(AH - SH)

LEV = $12.00(1,550 hrs - 1,500 hrs)

LEV = $600 unfavorable

Zippy

Quick Check

× × ×

Actual Rate Standard Rate Standard Rate

1,550 hours 1,550 hours 1,500 hours

× × ×

$12.20 per hour $12.00 per hour $12.00 per hour

= $18,910 = $18,600 = $18,000

$310 unfavorable $600 unfavorable

Learning Objective 4

manufacturing

overhead rate and

efficiency variances.

Variable Manufacturing Overhead Variances

– An Example

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.

Variable Manufacturing Overhead Variances

Summary

× × ×

Actual Rate Standard Rate Standard Rate

2,500 hours 2,500 hours 2,400 hours

× × ×

$4.20 per hour $4.00 per hour $4.00 per hour

= $10,500 = $10,000 = $9,600

$500 unfavorable $400 unfavorable

Variable Manufacturing Overhead Variances

Summary

× × ×

Actual Rate Standard Rate Standard Rate

2,500 hours 2,500 hours 2,400 hours

× $10,500× 2,500 hours ×

$4.20 per hour $4.00 per per

= $4.20 hourhour $4.00 per hour

= $10,500 = $10,000 = $9,600

$500 unfavorable $400 unfavorable

Variable Manufacturing Overhead Variances

Summary

× × ×

Actual Rate Standard Rate Standard Rate

2,500 hours 2,500 hours 2,400 hours

× ×

1.2 hours per parka 2,000 ×

$4.20 per hour parkas$4.00 per hour

= 2,400 hours $4.00 per hour

= $10,500 = $10,000 = $9,600

$500 unfavorable $400 unfavorable

Variable Manufacturing Overhead

Variances: Using Factored Equations

VMRV = AH (AR - SR)

= 2,500 hours ($4.20 per hour – $4.00 per hour)

= 2,500 hours ($0.20 per hour)

= $500 unfavorable

Variable manufacturing overhead efficiency variance

VMEV = SR (AH - SH)

= $4.00 per hour (2,500 hours – 2,400 hours)

= $4.00 per hour (100 hours)

= $400 unfavorable

Zippy

Quick Check

manufacturing overhead standard to

manufacture one Zippy:

1.5 standard hours per Zippy at

$3.00 per direct labor hour

Last week, 1,550 hours were worked to make

1,000 Zippies, and $5,115 was spent for

variable manufacturing overhead.

Zippy

Quick Check

Hanson’s

Hanson’s rate

rate variance

variance (VMRV)

(VMRV) for for variable

variable

manufacturing

manufacturing overhead

overhead for

for the

the week

week was:

was:

a.

a. $465

$465 unfavorable.

unfavorable.

b.

b. $400

$400 favorable.

favorable.

c.

c. $335

$335 unfavorable.

unfavorable.

d.

d. $300

$300 favorable.

favorable.

Zippy

Quick Check

Hanson’s

Hanson’s rate

rate variance

variance (VMRV)

(VMRV) for for variable

variable

manufacturing

manufacturing overhead

overhead for

for the

the week

week was:

was:

a.

a. $465

$465 unfavorable.

unfavorable.

b.

b. $400

$400 favorable.

favorable.

VMRV = AH(AR - SR)

c. $335 unfavorable.

c. $335 unfavorable. VMRV = 1,550 hrs($3.30 - $3.00)

d.

d. $300

$300 favorable.

favorable. VMRV = $465 unfavorable

Zippy

Quick Check

Hanson’s

Hanson’s efficiency

efficiency variance

variance (VMEV)

(VMEV) forfor

variable

variable manufacturing

manufacturing overhead

overhead for

for the

the week

week

was:

was:

a.

a. $435

$435 unfavorable.

unfavorable.

b.

b. $435

$435 favorable.

favorable.

c.

c. $150

$150 unfavorable.

unfavorable.

d.

d. $150

$150 favorable.

favorable.

Zippy

Quick Check

Hanson’s

Hanson’s efficiency

efficiency variance

variance (VMEV)

(VMEV) for for

variable

variable manufacturing

manufacturing overhead

overhead forfor the

the week

week

was:

was:

a.

a. $435

$435 unfavorable.

unfavorable.

b.

b. $435

$435 favorable.

favorable. 1,000 units × 1.5 hrs per unit

c.

c. $150

$150 unfavorable.

unfavorable.

d.

d. $150

$150 favorable.

favorable.

VMEV = SR(AH - SH)

VMEV = $3.00(1,550 hrs - 1,500 hrs)

VMEV = $150 unfavorable

Zippy

Quick Check

× × ×

Actual Rate Standard Rate Standard Rate

1,550 hours 1,550 hours 1,500 hours

× × ×

$3.30 per hour $3.00 per hour $3.00 per hour

= $5,115 = $4,650 = $4,500

$465 unfavorable $150 unfavorable

Variance Analysis and Management by

Exception

Larger variances, in

How do I know dollar amount or as

which variances to a percentage of the

investigate? standard, are

investigated first.

A Statistical Control Chart

Favorable Limit

• •

• • •

Desired Value

• •

Unfavorable Limit •

•

1 2 3 4 5 6 7 8 9

Variance Measurements

Advantages of Standard Costs

exception and efficiency

Advantages

Enhances

Simplified responsibility

bookkeeping accounting

Potential Problems with Standard Costs

Emphasizing standards Favorable

may exclude other variances may

important objectives. be misinterpreted.

Potential

Problems

Standard cost Emphasis on

reports may negative may

not be timely. impact morale.

about the relationship improvement may

between labor be more important

cost and output. than meeting standards.

Learning Objective 5

time, throughput time,

and manufacturing

cycle efficiency (MCE).

Delivery Performance Measures

Received Started Shipped

Wait Time + Move Time + Queue Time

Throughput Time

Delivery Performance Measures

Received Started Shipped

Wait Time + Move Time + Queue Time

Throughput Time

Manufacturing Value-added time

Cycle = Manufacturing cycle time

Efficiency

Quick Check

AA TQM

TQM team

team at

at Narton

Narton Corp

Corp has

has recorded

recorded the

the

following

following average

average times

times for

for production:

production:

Wait

Wait 3.0

3.0 days

days Move

Move 0.5

0.5 days

days

Inspection

Inspection 0.4

0.4 days

days Queue

Queue 9.3

9.3 days

days

Process

Process 0.20.2 days

days

What

What is

is the

the throughput

throughput time?

time?

a.

a. 10.4

10.4 days.

days.

b.

b. 0.2

0.2 days.

days.

c.

c. 4.1

4.1 days.

days.

d.

d. 13.4

13.4 days.

days.

Quick Check

AA TQM

TQM team

team at

at Narton

Narton Corp

Corp has

has recorded

recorded the

the

following

following average

average times

times for

for production:

production:

Wait

Wait 3.0

3.0 days

days Move

Move 0.5

0.5 days

days

Inspection

Inspection 0.4

0.4 days

days Queue

Queue 9.3

9.3 days

days

Process

Process 0.20.2 days

days

What

What is

is the

the throughput

throughput time?

time?

a.

a. 10.4

10.4 days.

days.

b.

b. 0.2

0.2 days.

Throughput days.

time = Process + Inspection + Move + Queue

c.

c. 4.1

4.1 days.

days. = 0.2 days + 0.4 days + 0.5 days + 9.3 days

d.

d. 13.4 days. = 10.4 days

13.4 days.

Quick Check

AA TQM

TQM team

team at

at Narton

Narton Corp

Corp has

has recorded

recorded the

the

following

following average

average times

times for

for production:

production:

Wait

Wait 3.0

3.0 days

days Move

Move 0.5

0.5 days

days

Inspection

Inspection 0.4

0.4 days

days Queue

Queue 9.3

9.3 days

days

Process

Process 0.20.2 days

days

What

What is

is the

the Manufacturing

Manufacturing Cycle

Cycle Efficiency

Efficiency (MCE)?

(MCE)?

a.

a. 50.0%.

50.0%.

b.

b. 1.9%.

1.9%.

c.

c. 52.0%.

52.0%.

d.

d. 5.1%.

5.1%.

Quick Check

AA TQM

TQM team

team at

at Narton

Narton Corp

Corp has

has recorded

recorded the

the

following

following average

average times

times for

for production:

production:

Wait

Wait 3.0

3.0 days

days Move

Move 0.5

0.5 days

days

Inspection

Inspection 0.4

0.4 days

days Queue

Queue 9.3

9.3 days

days

Process

Process 0.20.2 days

days

What

What is

is the

the Manufacturing

Manufacturing Cycle

Cycle Efficiency

Efficiency (MCE)?

(MCE)?

a.

a. 50.0%.

50.0%. MCE = Value-added time ÷ Throughput time

b.

b. 1.9%.

1.9%. = Process time ÷ Throughput time

c.

c. 52.0%.

52.0%. = 0.2 days ÷ 10.4 days

d.

d. 5.1%.

5.1%. = 1.9%

Quick Check

AA TQM

TQM team

team at

at Narton

Narton Corp

Corp has

has recorded

recorded the

the

following

following average

average times

times for

for production:

production:

Wait

Wait 3.0

3.0 days

days Move

Move 0.5

0.5 days

days

Inspection

Inspection 0.4

0.4 days

days Queue

Queue 9.3

9.3 days

days

Process

Process 0.20.2 days

days

What

What is

is the

the delivery

delivery cycle

cycle time

time (DCT)?

(DCT)?

a.

a. 0.5

0.5 days.

days.

b.

b. 0.7

0.7 days.

days.

c.

c. 13.4

13.4 days.

days.

d.

d. 10.4

10.4 days.

days.

Quick Check

AA TQM

TQM team

team at

at Narton

Narton Corp

Corp has

has recorded

recorded the

the

following

following average

average times

times for

for production:

production:

Wait

Wait 3.0

3.0 days

days Move

Move 0.5

0.5 days

days

Inspection

Inspection 0.4

0.4 days

days Queue

Queue 9.3

9.3 days

days

Process

Process 0.20.2 days

days

What

What is

is the

the delivery

delivery cycle

cycle time

time (DCT)?

(DCT)?

a.

a. 0.5

0.5 days.

days.

b.

b. 0.7

0.7 days.

days. DCT = Wait time + Throughput time

c.

c. 13.4

13.4 days.

days. = 3.0 days + 10.4 days

d.

d. 10.4

10.4 days.

days. = 13.4 days

Predetermined Overhead Rates and Overhead

Analysis in a Standard Costing System

Appendix 11A

Learning Objective 6

(Appendix 11A)

Compute and interpret

the fixed overhead

budget and volume

variances.

Fixed Overhead Budget Variance

Actual Budgeted Fixed

Fixed Fixed Overhead

Overhead Overhead Applied

Budget

variance

Actual Budgeted

Budget

= fixed – fixed

variance

overhead overhead

Fixed Overhead Volume Variance

Actual Budgeted Fixed

Fixed Fixed Overhead

Overhead Overhead Applied

Volume

variance

Fixed

Budgeted

Volume overhead

= fixed –

variance applied to

overhead

work in process

Fixed Overhead Volume Variance

Actual Budgeted Fixed

Fixed Fixed Overhead

Overhead Overhead Applied

DH × FR SH × FR

Volume

variance

Volume variance = FPOHR × (DH – SH)

DH = Denominator hours

SH = Standard hours allowed for actual output

Computing Fixed Overhead Variances

Computing Fixed Overhead Variances

Predetermined Overhead Rates

=

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

Predetermined Overhead Rates

Variable component of the $90,000

=

predetermined overhead rate 90,000 Machine-hours

= $1.00 per machine-hour

predetermined overhead rate

=

predetermined overhead rate 90,000 Machine-hours

= $3.00 per machine-hour

predetermined overhead rate

Applying Manufacturing Overhead

= ×

applied overhead rate for the actual output

= × 84,000 machine-hours

applied machine-hour

Overhead

= $336,000

applied

Computing the Budget Variance

Actual Budgeted

Budget

= fixed – fixed

variance

overhead overhead

Budget

= $280,000 – $270,000

variance

Budget

= $10,000 Unfavorable

variance

Computing the Volume Variance

Fixed

Budgeted

Volume overhead

= fixed –

variance applied to

overhead

work in process

Volume

variance

= $270,000 – ( $3.00 per

machine-hour

×

$84,000

)

machine-hours

Volume

= $18,000 Unfavorable

variance

Computing the Volume Variance

Volume variance = FPOHR × (DH – SH)

DH = Denominator hours

SH = Standard hours allowed for actual output

Volume

variance

=

$3.00 per

machine-hour

× ( 90,000

mach-hours

–

84,000

)

mach-hours

variance

A Pictorial View of the Variances

Fixed Fixed Applied to

Overhead Overhead Work in Process

280,000 270,000 252,000

$10,000 unfavorable $18,000 unfavorable

Fixed Overhead Variances –

A Graphic Approach

Let’s look at a

graph showing

fixed overhead

variances. We will

use ColaCo’s

numbers from the

previous example.

Graphic Analysis of Fixed

Overhead Variances

Budget

$270,000

at

li ed

p p u r

d a ho

e a a r d

e rh n d

o v s ta

e d e r

Fix 0 p Denominator

3 .0 hours

$

0

0 Machine-hours (000) 90

Graphic Analysis of Fixed

Overhead Variances

Actual

$280,000

Budget { Budget Variance 10,000 U

$270,000

at

li ed

p p u r

d a ho

e a a r d

e rh n d

o v s ta

e d e r

Fix 0 p Denominator

3 .0 hours

$

0

0 Machine-hours (000) 90

Graphic Analysis of Fixed

Overhead Variances

Actual

$280,000

Budget { Budget Variance 10,000 U

$270,000

Applied { Volume Variance 18,000 U

$252,000

at

li ed

p p u r

d a ho

e a a r d

e rh n d

o v s ta

e d e r

Fix 0 p Standard Denominator

3 .0 hours hours

$

0

0 Machine-hours (000) 84 90

Reconciling Overhead Variances and

Underapplied or Overapplied Overhead

In a standard

cost system:

Unfavorable Favorable

variances are equivalent variances are equivalent

to underapplied overhead. to overapplied overhead.

equals the under- or overapplied

overhead cost for the period.

Reconciling Overhead Variances and

Underapplied or Overapplied Overhead

Computing the Variable Overhead Variances

VMRV = (AH × AR) – (AH × SR)

= $100,000 – (88,000 hours × $1.00 per hour)

= $12,000 unfavorable

Computing the Variable Overhead Variances

VMEV = (AH × SR) – (SH × SR)

= $88,000 – (84,000 hours × $1.00 per hour)

= $4,000 unfavorable

Computing the Sum of All Variances

Journal Entries to Record

Variances

Appendix 11B

Learning Objective 7

(Appendix 11B)

Prepare journal entries

to record standard

costs and variances.

Appendix 11B

Journal Entries to Record Variances

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

Material Labor

Labor

AQ

AQ ××AP

AP == $1,029

$1,029 AH

AH ××AR

AR == $26,250

$26,250

AQ

AQ ×× SP

SP == $1,050

$1,050 AH

AH ×× SR

SR == $25,000

$25,000

SQ

SQ ×× SP

SP == $1,000

$1,000 SH

SH ×× SR

SR == $24,000

$24,000

MPV

MPV == $21

$21 FF LRV

LRV == $1,250

$1,250 UU

MQV

MQV == $50

$50 UU LEV

LEV == $1,000

$1,000 UU

the labor and material variances.

Appendix 11B

Recording Material Variances

Appendix 11B

Recording Labor Variances

Cost Flows in a Standard Cost System

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.

## Molto più che documenti.

Scopri tutto ciò che Scribd ha da offrire, inclusi libri e audiolibri dei maggiori editori.

Annulla in qualsiasi momento.