Professional Documents
Culture Documents
Chapter 9:
Standard Costs and Variance Analysis
Slides Prepared by: Scott Peterson Northern State University
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
Standard Costs
The term standard cost refers to the cost that management believes should be incurred to produce a good or service under anticipated conditions. The primary benefit of a standard cost system is that it allows for comparison of standard versus actual costs. Differences are referred to as standard cost variances and should be investigated if significant. Learning Objectives:
1.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
Standard costs are developed in a variety of ways. They are specified in engineering plans.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
Standard costs are developed in a variety of ways. They are specified by formulas or recipes. developed from price lists provided by suppliers.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
Standard costs are developed in a variety of ways. They are specified by formulas or recipes. developed from price lists provided by suppliers. determined time and motion studies conducted by industrial engineers.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
Standard costs are developed in a variety of ways. They are specified by formulas or recipes. developed from price lists provided by suppliers. determined time and motion studies conducted by industrial engineers. developed from analyses of past data.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
Management by Exception
Because investigation of standard cost variances is itself a costly activity, management must decide which variances to investigate. Most managers practice management by exception. What is exceptional? Usually an absolute dollar amount or a percentage dollar amount.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
3.
4.
5.
Explain how standard costs are developed. Calculate and interpret variances for direct material. Calculate and interpret variances for direct labor. Calculate and interpret variances for manufacturing overhead. Discuss how the management by exception approach is applied to investigation of standard cost variances.
2.
3.
Actual overhead is recorded in the manufacturing overhead account. Overhead is applied to Work in Process Inventory at the standard cost. The difference between actual overhead and overhead applied at standard is closed and overhead variances are identified. More
*Various accounts include indirect wages payable, utilities payable and accumulated depreciation.
x x
Copyright
2001 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.