1、Standard Costs and Operating Performance Measures,Standard Costs,Benchmarks formeasuring performance.,The expected levelof performance.,Based on carefullypredetermined amounts.,Used for planning labor, materialand overhead requirements.,Standard Costs are,Standard Costs,DirectMaterial,Managers focus
2、 on quantities and coststhat exceed standards, a practice known as management by exception.,Type of Product Cost,Amount,DirectLabor,ManufacturingOverhead,Standard,Accountants, engineers, personnel administrators, and production managers combine efforts to set standards based on experience and expect
3、ations.,Setting Standard Costs,Setting Standard Costs,Engineer,ManagerialAccountant,Setting Standard Costs,Practical standardsshould be set at levelsthat are currentlyattainable withreasonable andefficient effort.,Productionmanager,Setting Standard Costs,I agree. Ideal standards, that are based on p
4、erfection, areunattainable and discourage most employees.,HumanResourcesManager,Setting Direct Material Standards,QuantityStandards,Use product design specifications.,PriceStandards,Final, deliveredcost of materials,net of discounts.,Setting Direct Labor Standards,RateStandards,Use wage surveys andl
5、abor contracts.,TimeStandards,Use time and motion studies foreach labor operation.,Setting Variable Overhead Standards,RateStandards,The rate is the variable portion of the predetermined overhead rate.,ActivityStandards,The activity is the base used to calculate the predetermined overhead.,Standard
6、Cost Card Variable Production Cost,A standard cost card for one unit of product might look like this:,Are standards the same as budgets?,A standard is the expected cost for one unit.A budget is the expected cost for all units.,Standards vs. Budgets,Standard Cost Variances,Product Cost,Standard,This
7、variance is unfavorablebecause the actual costexceeds the standard cost.,A standard cost variance is the amount by whichan actual cost differs from the standard cost.,Standard Cost Variances,Variance Analysis Cycle,Prepare standard cost performance report,Conduct next periods operations,Analyze vari
8、ances,Identifyquestions,Receive explanations,Takecorrective actions,Begin,Standard Cost Variances,Standard Cost Variances,A General Model for Variance Analysis,Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard Price,Price Variance,Quantity Variance,Standard price
9、 is the amount that should have been paid for the resources acquired.,Price Variance,Quantity Variance,Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard Price,A General Model for Variance Analysis,Standard quantity is the quantity allowed for the actual good outp
10、ut.,A General Model for Variance Analysis,AQ(AP - SP) SP(AQ - SQ) AQ = Actual Quantity SP = Standard Price AP = Actual Price SQ = Standard Quantity,Price Variance,Quantity Variance,Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard Price,Standard Costs,Lets use th
11、e general model to calculate standard cost variances, starting withdirect material.,Hanson Inc. has the following direct material 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 c
12、ost a total of $6,630.,Material Variances Example,What is the actual price per poundpaid for the material? a.$4.00 per pound.b.$4.10 per pound.c.$3.90 per pound.d.$6.63 per pound.,Material Variances,What is the actual price per poundpaid for the material? a.$4.00 per pound.b.$4.10 per pound.c.$3.90
13、per pound.d.$6.63 per pound.,AP = $6,630 1,700 lbs.AP = $3.90 per lb.,Material Variances,Hansons material price variance (MPV)for the week was:a.$170 unfavorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.,Material Variances,Hansons material price variance (MPV)for the week was:a.$170 unfa
14、vorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.,MPV = AQ(AP - SP) MPV = 1,700 lbs. ($3.90 - 4.00) MPV = $170 Favorable,Material Variances,The standard quantity of material thatshould have been used to produce1,000 Zippies is:a.1,700 pounds.b.1,500 pounds.c.2,550 pounds.d.2,000 pounds.,
15、Material Variances,The standard quantity of material thatshould have been used to produce1,000 Zippies is:a.1,700 pounds.b.1,500 pounds.c.2,550 pounds.d.2,000 pounds.,SQ = 1,000 units 1.5 lbs per unit SQ = 1,500 lbs,Material Variances,Hansons material quantity variance (MQV)for the week was:a.$170 u
16、nfavorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.,Material Variances,Hansons material quantity variance (MQV)for the week was:a.$170 unfavorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.,MQV = SP(AQ - SQ) MQV = $4.00(1,700 lbs - 1,500 lbs) MQV = $800 unfavorable,Material V
17、ariances,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,Price variance$170 favorable,Quantity variance$800 unfavorable,Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard Price,Material Variances Summary,Mater
18、ial Variances,Hanson purchased and used 1,700 pounds. How are the variances computed if the amount purchased differs from the amount used?,The price variance is computed on the entire quantity purchased.The quantity variance is computed only on the quantity used.,Hanson Inc. has the following materi
19、al standard to manufacture one Zippy:1.5 pounds per Zippy at $4.00 per pound Last week 2,800 pounds of material were purchased at a total cost of $10,920, and 1,700 pounds were used to make 1,000 Zippies.,Material Variances Continued,Actual Quantity Actual Quantity Purchased Purchased Actual Price S
20、tandard Price,2,800 lbs. 2,800 lbs. $3.90 per lb. $4.00 per lb. = $10,920 = $11,200,Price variance$280 favorable,Price variance increases because quantity purchased increases.,Material Variances Continued,Actual Quantity Used Standard Quantity Standard Price Standard Price,1,700 lbs. 1,500 lbs. $4.0
21、0 per lb. $4.00 per lb. = $6,800 = $6,000,Quantity variance$800 unfavorable,Quantity variance is unchanged because actual and standard quantities are unchanged.,Material Variances Continued,Isolation of Material Variances,Responsibility for Material Variances,Standard Costs,Now lets calculate standa
22、rd cost variances for direct labor.,Hanson Inc. has the following direct labor standard to manufacture one Zippy: 1.5 standard hours per Zippy at $6.00 perdirect labor hour Last week 1,550 direct labor hours were worked at a total labor cost of $9,610 to make 1,000 Zippies.,Labor Variances Example,W
23、hat was Hansons actual rate (AR)for labor for the week?a.$6.20 per hour.b.$6.00 per hour.c.$5.80 per hour.d.$5.60 per hour.,Labor Variances,What was Hansons actual rate (AR)for labor for the week?a.$6.20 per hour.b.$6.00 per hour.c.$5.80 per hour.d.$5.60 per hour.,Labor Variances,AR = $9,610 1,550 h
24、ours AR = $6.20 per hour,Hansons labor rate variance (LRV) for the week was:a.$310 unfavorable.b.$310 favorable.c.$300 unfavorable.d.$300 favorable.,Labor Variances,Hansons labor rate variance (LRV) for the week was:a.$310 unfavorable.b.$310 favorable.c.$300 unfavorable.d.$300 favorable.,Labor Varia
25、nces,LRV = AH(AR - SR) LRV = 1,550 hrs($6.20 - $6.00) LRV = $310 unfavorable,The standard hours (SH) of labor thatshould have been worked to produce1,000 Zippies is:a.1,550 hours.b.1,500 hours.c.1,700 hours.d.1,800 hours.,Labor Variances,The standard hours (SH) of labor thatshould have been worked t
26、o produce1,000 Zippies is:a.1,550 hours.b.1,500 hours.c.1,700 hours.d.1,800 hours.,Labor Variances,SH = 1,000 units 1.5 hours per unit SH = 1,500 hours,Hansons labor efficiency variance (LEV)for the week was:a.$290 unfavorable.b.$290 favorable.c.$300 unfavorable.d.$300 favorable.,Labor Variances,Han
27、sons labor efficiency variance (LEV)for the week was:a.$290 unfavorable.b.$290 favorable.c.$300 unfavorable.d.$300 favorable.,Labor Variances,LEV = SR(AH - SH) LEV = $6.00(1,550 hrs - 1,500 hrs) LEV = $300 unfavorable,Actual Hours Actual Hours Standard Hours Actual Rate Standard Rate Standard Rate,L
28、abor Variances Summary,Rate variance$310 unfavorable,Efficiency variance$300 unfavorable,1,550 hours 1,550 hours 1,500 hours $6.20 per hour $6.00 per hour $6.00 per hour = $9,610 = $9,300 = $9,000,Labor Rate Variance A Closer Look,High skill,high rate,Low skill,low rate,Using highly paid skilled wor
29、kers toperform unskilled tasks results in anunfavorable rate variance.,Production managers who make work assignmentsare generally responsible for rate variances.,Labor Efficiency Variance A Closer Look,UnfavorableEfficiencyVariance,Poorlytrainedworkers,Poorqualitymaterials,Poorlymaintainedequipment,
30、Poorsupervisionof workers,Responsibility for Labor Variances,Responsibility for Labor Variances,Maybe I can attribute the laborand material variances to personnel for hiring the wrong peopleand training them poorly.,Standard Costs,Now lets calculate standard cost variances for the last of the variab
31、le production costs variable manufacturing overhead.,Hanson Inc. has the following variable manufacturing overhead standard tomanufacture one Zippy: 1.5 standard hours per Zippy at $3.00 perdirect labor hour Last week 1,550 hours were worked to make 1,000 Zippies, and $5,115 was spent forvariable ma
32、nufacturing overhead.,Variable ManufacturingOverhead Variances Example,What was Hansons actual rate (AR) for variable manufacturing overhead rate for the week?a.$3.00 per hour.b.$3.19 per hour.c.$3.30 per hour.d.$4.50 per hour.,Variable ManufacturingOverhead Variances,What was Hansons actual rate (A
33、R) for variable manufacturing overhead rate for the week?a.$3.00 per hour.b.$3.19 per hour.c.$3.30 per hour.d.$4.50 per hour.,Variable ManufacturingOverhead Variances,AR = $5,115 1,550 hours AR = $3.30 per hour,Hansons spending variance (SV) for variable manufacturing overhead forthe week was:a.$465
34、 unfavorable.b.$400 favorable.c.$335 unfavorable.d.$300 favorable.,Variable ManufacturingOverhead Variances,Hansons spending variance (SV) for variable manufacturing overhead forthe week was:a.$465 unfavorable.b.$400 favorable.c.$335 unfavorable.d.$300 favorable.,Variable ManufacturingOverhead Varia
35、nces,SV = AH(AR - SR) SV = 1,550 hrs($3.30 - $3.00) SV = $465 unfavorable,Hansons efficiency variance (EV) for variable manufacturing overhead for the week was:a.$435 unfavorable.b.$435 favorable.c.$150 unfavorable.d.$150 favorable.,Variable ManufacturingOverhead Variances,Hansons efficiency varianc
36、e (EV) for variable manufacturing overhead for the week was:a.$435 unfavorable.b.$435 favorable.c.$150 unfavorable.d.$150 favorable.,Variable ManufacturingOverhead Variances,EV = SR(AH - SH) EV = $3.00(1,550 hrs - 1,500 hrs) EV = $150 unfavorable,1,000 units 1.5 hrs per unit,Spending variance$465 un
37、favorable,Efficiency variance$150 unfavorable,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,Actual Hours Actual Hours Standard Hours Actual Rate Standard Rate Standard Rate,Variable ManufacturingOverhead Variances,Variable Manufacturing O
38、verhead Variances A Closer Look,If variable overhead is applied on the basisof direct labor hours, the labor efficiencyand variable overhead efficiency varianceswill move in tandem.,Larger variances, in dollar amount or as a percentage of the standard, are investigated first.,Variance Analysis and M
39、anagement by Exception,How do I know which variances to investigate?,Advantages of Standard Costs,Management byexception,Improved cost control and performanceevaluation,Better Informationfor planning anddecision making,Possible reductionsin production costs,Advantages,PotentialProblems,Emphasis on n
40、egativemay impact morale.,Emphasizing standardsmay exclude otherimportant objectives.,Favorable variancesmay be misinterpreted.,Continuous improvementmay be moreimportant thanmeeting standards.,Standard costreports maynot be timely.,Labor quantity standardsand efficiency variancesmay not be appropri
41、ate.,The Balanced Scorecard,Management translates its strategy into performance measures that employees understand and accept.,Performancemeasures,Financial,Customers,Learningand growth,Internalbusinessprocesses,The Balanced Scorecard,How do we lookto the owners?,How can wecontinually learn,grow, and improve?,
