Professional Documents
Culture Documents
CHAPTER
Standard
Costing: A
Managerial
Control Tool
9 -2
Objectives
1. Tell how unit standards
After arethis
studying set and why
standard costing systems are
chapter, you shouldadapted.
2. State the purposebeofable
a standard
to: cost sheet.
3. Describe the basic concepts underlying
variance analysis, and explain when
variances should be investigated.
4. Compute the material and labor variances,
and explain how they are used for control.
Continued
9 -3
Objectives
5. Calculate the variable and fixed overhead
variances, and give their definitions.
6. Appendix: Prepare journal entries for
materials and labor variances, and show how
to account for overhead variances.
9 -4
Manufacturing Costs
Direct Direct
Materials Labor Overhead
Actual costing system Actual Actual Actual
Normal costing system Actual Actual Budgeted
Standard costing system Standard Standard Standard
9 -7
1. AP x AQ 2. SP x AQ 3. SP x SQ
(Actual Quantity (Actual Quantity (Standard
of Input at Actual of Input at Quantity of Input
Price) Standard Price) at Standard Price)
Budget
Variance (1-3)
9 -13
Unfavorable variances
occur whenever actual Favorable variances
prices or usage of inputs occur whenever the
are greater than standard opposite occurs.
prices or usage.
9 -14
Cost
x
$110,000
x
x
x
$100,000
x
x $ 90,000
Time
9 -15
AQ x AP AQ x SP SQ x SP
780,000 x 0.0069 780,000 x $.0.0060 873,000 x $0.0060
$5,382 $4,680 $5,238
$558 F
$702 U
Usage
Price Variance
Variance
$144 U
Total Variance
9 -17
The actual
The actual
The standard
quantity of
price per price
unit per unit
material used
9 -18
The standard
The actual
The standard
quantity
quantity of of
price per unit
materials
materials used
allowed for the
actual output
9 -20
Percent of SR x SH = $126/$2,520 = 5%
Labor Variances: Columnar Approach 9 -23
AH x AR AH x SR SH x SR
360 x $735 360 x $7.00 339.5 x $7.00
$2,646 $2,520 $2,376.50
$126 U $143.50 U
Rate Variance Efficiency Variance
$269.50 U
Total Variance
9 -24
Percent of SH x SR = $143.50/$2,376.50 = 6%
9 -26
$60 U $84 U
Spending Efficiency Variance
Variance
$144 U
Total Variance
9 -28
Variable Overhead
Spending Variances
VOSV = (AVOR x AH) – (SVOR x AH)
= (AVOR – SVOR)AH
= ($4.00 – $3.85)400
= $60 U
9 -29
$970 F $62,497 U
Spending Volume
Variance Variance
$61,527 U
Total Variance
9 -34
Volume Variance
Volume variance = $32.05(23,400 – 21,450)
= ($32.05 x 23,400) – ($32.05 x 21,450)
= $749,970 – $687,473
= Budgeted fixed overhead – Applied
fixed overhead
= $62,497 U
9 -36
Appendix:
Accounting for
Variances
9 -37
Labor Variances
9 -40
Closing Variances
9 -41
Closing Variances
9 -42
Chapter Nine
The End
9 -43