Professional Documents
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9 STANDARD COSTING
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LEARNING OBJECTIVES
LEARNING GOALS
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LEARNING OBJECTIVES
1. Tell how unit standards are set; why
standard costing systems are adopted.
2. State the purpose of a standard cost sheet.
3. Describe basic concepts underlying
variance analysis & explain how they are
used for control.
Continued
3
LEARNING OBJECTIVES
4. Compute materials & labor variances;
explain how they are used for control.
5. Calculate variable & fixed overhead
variances & give their definitions.
6. Prepare journal entries for variances
(Appendix).
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QUESTIONS TO THINK ABOUT:
Blue Corn Foods
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QUESTIONS TO THINK ABOUT:
Blue Corn Foods
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QUESTIONS TO THINK ABOUT:
Blue Corn Foods
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LEARNING OBJECTIVE
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LO 1
QUANTITY STANDARDS:
Definition
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LO 1
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LO 1
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LO 1
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LO 1
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LO 1
COST ASSIGNMENT
Standard costs are
readily available for
product costing in a
standard cost system.
EXHIBIT 9-1
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LEARNING OBJECTIVE
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LO 2
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LO 2
EXHIBIT 9-2
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LEARNING OBJECTIVE
3 underlying variance
analysis & explain how
they are used for control.
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LO 3
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LO 3
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LO 3
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LO 3
Total Variance
= (AP X AQ) – (SP X SQ)
= Actual price x Actual quantity
– Standard Price x Standard Quantity
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LO 3
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LEARNING OBJECTIVE
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LO 4
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LO 4
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LO 4
EXHIBIT 9-5
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LO 4
MATERIALS VARIANCES
Decompose total
materials variance
into price & usage
variances.
EXHIBIT 9-6
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LO 4
MPV
= (AQ X AP) – (AQ X SP)
= (AP – SP)AQ
= ($0.0069 - $0.0060) 780,000
= $ 702 U
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LO 4
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LO 4
MPV AS PERFORMANCE
EVALUATION
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LO 4
MUV
= (AQ X SP) – (SQ X SP)
= (AQ – SQ)SP
= (780,000 – 873,000) $0.006
= $ 558 F
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LO 4
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LO 4
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LO 4
LABOR VARIANCES
Decompose total
labor variance into
rate & efficiency
variances.
EXHIBIT 9-7
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LO 4
LRV
= (AH X AR) – (AH X SR)
= (AR – SR)AH
= ($7.35 - $7.00) 360
= $ 126 U
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LO 4
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LO 4
LEV
= (AH X SR) – (SH X SR)
= (AH – SH)SR
= (360 – 339.5) $7
= $ 143.50 U
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LO 4
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LO 4
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LEARNING OBJECTIVE
5 fixed overhead
variances & give their
definitions.
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LO 5
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LO 5
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LO 5
VARIABLE OVERHEAD
VARIANCE
Decomposes total
variable overhead
variance into
spending &
efficiency
variances.
EXHIBIT 9-8
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LO 5
Spending Variance
= (AVOR X AH) – (SVOR X AH)
= (AVOR – SVOR)AH
= ($4.00 - $3.85) 400
= $ 60 U
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LO 5
VARIABLE OVERHEAD
SPENDING VARIANCE
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LO 5
Efficiency Variance
= (AH – SH)SVOR
= (400 – 378.3) $3.85
= $ 84 U
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LO 5
Actual Results
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LO 5
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LO 5
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LO 5
EXHIBIT 9-11
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LO 5
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LO 5
Volume Variance
= Budgeted – Applied fixed overhead
= $479,970 - $687,473
= $62,497 U
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LEARNING OBJECTIVE
6 for variances
(Appendix).
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LO 6
JOURNAL ENTRIES
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CHAPTER 9
THE END
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