1、Standard Costs and Operating Performance Measures Chapter10 The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard CostsBenchmarks formeasuring performance.The expected levelof performance.Based on carefullypredetermined amounts.Used for planning labor,materialand overhead requirements.Standar
2、d Costs are The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard CostsDirectMaterialManagers focus on quantities and coststhat exceed standards,a practice known as management by exception.Type of Product CostAmountDirectLaborManufacturingOverheadStandard The McGraw-Hill Companies,Inc.,2000Ir
3、win/McGraw-Hill Accountants,engineers,personnel administrators,and production managers combine efforts to set standards based on experience and expectations.Setting Standard Costs The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSetting Standard CostsShould we usepractical standardsor ideal stand
4、ards?EngineerManagerialAccountant The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSetting Standard CostsPractical standardsshould be set at levelsthat are currentlyattainable withreasonable andefficient effort.Productionmanager The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSetting Standard
5、 CostsI agree.Ideal standards,that are based on perfection,areunattainable and discourage most employees.HumanResourcesManager The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSetting Direct Material Standards QuantityStandardsUse product design specifications.PriceStandardsFinal,deliveredcost of
6、 materials,net of discounts.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSetting Direct Labor Standards RateStandardsUse wage surveys andlabor contracts.TimeStandardsUse time and motion studies foreach labor operation.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSetting Variable Overhe
7、ad Standards RateStandardsThe rate is the variable portion of the predetermined overhead rate.ActivityStandardsThe activity is the base used to calculate the predetermined overhead.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard Cost Card Variable Production Cost A standard cost card fo
8、r one unit of product might look like this:AA x BStandardStandardStandardQuantityPriceCostInputsor Hoursor Rateper UnitDirect materials 3.0 lbs.4.00$per lb.12.00$Direct labor 2.5 hours14.00 per hour35.00 Variable mfg.overhead 2.5 hours3.00 per hour7.50 Total standard unit cost54.50$B The McGraw-Hill
9、 Companies,Inc.,2000Irwin/McGraw-HillAre 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 The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard Cost VariancesProduct CostStandardThis variance is unfavor
10、ablebecause the actual costexceeds the standard cost.A standard cost variance is the amount by whichan actual cost differs from the standard cost.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard Cost VariancesI see that thereis an unfavorable variance.But why arevariances important to me
11、?First,they point to causes ofproblems and directionsfor improvement.Second,they trigger investigations in departments having responsibility for incurring the costs.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillVariance Analysis CyclePrepare standard cost performance reportConduct next periods
12、 operationsAnalyze variancesIdentifyquestionsReceive explanationsTakecorrective actionsBegin The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard Cost VariancesPrice VarianceThe difference betweenthe actual price and thestandard priceStandard Cost VariancesQuantity VarianceThe difference bet
13、weenthe actual quantity andthe standard quantity The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillA General Model for Variance Analysis Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard PricePrice VarianceQuantity VarianceStandard price is the amount that shou
14、ld have been paid for the resources acquired.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillPrice VarianceQuantity Variance Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard PriceA General Model for Variance Analysis Standard quantity is the quantity allowed
15、 for the actual good output.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillA General Model for Variance Analysis AQ(AP-SP)SP(AQ-SQ)AQ=Actual Quantity SP=Standard Price AP=Actual Price SQ=Standard Quantity Price VarianceQuantity Variance Actual Quantity Actual Quantity Standard Quantity Actual P
16、rice Standard Price Standard Price The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard CostsLets use the general model to calculate standard cost variances,starting withdirect material.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hanson Inc.has the following direct material standard
17、 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.Material Variances ExampleZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill What is the actual price per pound
18、paid for the material?a.$4.00 per pound.b.$4.10 per pound.c.$3.90 per pound.d.$6.63 per pound.Material VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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.A
19、P=$6,630 1,700 lbs.AP=$3.90 per lb.Material VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons material price variance(MPV)for the week was:a.$170 unfavorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.Material VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwi
20、n/McGraw-Hill Hansons material price variance(MPV)for the week was:a.$170 unfavorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.MPV=AQ(AP-SP)MPV=1,700 lbs.($3.90-4.00)MPV=$170 FavorableMaterial VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill The standard quantity of ma
21、terial 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.Material VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill The standard quantity of material thatshould have been used to produce1,000 Zippies is:a.1,700 pounds.b
22、.1,500 pounds.c.2,550 pounds.d.2,000 pounds.SQ=1,000 units 1.5 lbs per unit SQ=1,500 lbsMaterial VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons material quantity variance(MQV)for the week was:a.$170 unfavorable.b.$170 favorable.c.$800 unfavorable.d.$800 favorable.Materia
23、l VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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 unfavorableMaterial VariancesZippy The McGraw-Hill
24、 Companies,Inc.,2000Irwin/McGraw-Hill 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 favorableQuantity variance$800 unfavorable Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard PriceMaterial Varian
25、ces SummaryZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillMaterial VariancesHanson 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 c
26、omputed only on the quantity used.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hanson Inc.has the following material 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
27、 to make 1,000 Zippies.Material Variances ContinuedZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Actual Quantity Actual Quantity Purchased Purchased Actual Price Standard 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 in
28、creases because quantity purchased increases.Material Variances ContinuedZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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$800 unfavorableQuan
29、tity variance is unchanged because actual and standard quantities are unchanged.Material Variances ContinuedZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillIsolation of Material VariancesI need the price variancesooner so that I can betteridentify purchasing problems.You accountants just d
30、ontunderstand the problems thatpurchasing managers have.Ill start computingthe price variancewhen material ispurchased rather thanwhen its used.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillResponsibility for Material VariancesI am not responsible for this unfavorable materialquantity variance
31、.You purchased cheapmaterial,so my peoplehad to use more of it.You used too much material because of poorly trained workers and poorly maintained equipment.Also,your poor scheduling sometimes requires me to rush order material at a higher price,causing unfavorable price variances.The McGraw-Hill Com
32、panies,Inc.,2000Irwin/McGraw-HillStandard CostsNow lets calculate standard cost variances for direct labor.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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 w
33、eek 1,550 direct labor hours were worked at a total labor cost of$9,610 to make 1,000 Zippies.Labor Variances ExampleZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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.L
34、abor VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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 hours AR=$6.20 per hourZippy The McGraw-Hill Companies,Inc.,2000Irwin/Mc
35、Graw-Hill Hansons labor rate variance(LRV)for the week was:a.$310 unfavorable.b.$310 favorable.c.$300 unfavorable.d.$300 favorable.Labor VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons labor rate variance(LRV)for the week was:a.$310 unfavorable.b.$310 favorable.c.$300 unf
36、avorable.d.$300 favorable.Labor Variances LRV=AH(AR-SR)LRV=1,550 hrs($6.20-$6.00)LRV=$310 unfavorableZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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 hour
37、s.Labor VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 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 SH=1,000 units 1.5 hours per unit SH=1,500 hoursZippy The McGraw-H
38、ill Companies,Inc.,2000Irwin/McGraw-Hill Hansons labor efficiency variance(LEV)for the week was:a.$290 unfavorable.b.$290 favorable.c.$300 unfavorable.d.$300 favorable.Labor VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons labor efficiency variance(LEV)for the week was:a.$
39、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 unfavorableZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Actual Hours Actual Hours Standard Hours Actual Rate Standard Rate Standard RateLabor Varianc
40、es SummaryRate variance$310 unfavorableEfficiency 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 Zippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillLabor Rate Variance A Closer LookHigh skill,high rateLow skill,lo
41、w rateUsing highly paid skilled workers toperform unskilled tasks results in anunfavorable rate variance.Production managers who make work assignmentsare generally responsible for rate variances.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillLabor Efficiency Variance A Closer LookUnfavorableEff
42、iciencyVariancePoorlytrainedworkersPoorqualitymaterialsPoorlymaintainedequipmentPoorsupervisionof workers The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillResponsibility for Labor VariancesI am not responsible for the unfavorable laborefficiency variance!You purchased cheapmaterial,so it took mor
43、etime to process it.You used too much time because of poorly trained workers and poor supervision.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillResponsibility for Labor VariancesMaybe I can attribute the laborand material variances to personnel for hiring the wrong peopleand training them poor
44、ly.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard CostsNow lets calculate standard cost variances for the last of the variable production costs variable manufacturing overhead.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hanson Inc.has the following variable manufacturing overh
45、ead 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 manufacturing overhead.Variable ManufacturingOverhead Variances ExampleZippy The McGraw-Hill Companies,Inc.,2000Irwin
46、/McGraw-Hill 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 VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill What was Hansons actual rate(AR)fo
47、r 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 hourZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons spending variance(SV)for variable
48、 manufacturing overhead forthe week was:a.$465 unfavorable.b.$400 favorable.c.$335 unfavorable.d.$300 favorable.Variable ManufacturingOverhead VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons spending variance(SV)for variable manufacturing overhead forthe week was:a.$465 u
49、nfavorable.b.$400 favorable.c.$335 unfavorable.d.$300 favorable.Variable ManufacturingOverhead Variances SV=AH(AR-SR)SV=1,550 hrs($3.30-$3.00)SV=$465 unfavorableZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons efficiency variance(EV)for variable manufacturing overhead for the week
50、was:a.$435 unfavorable.b.$435 favorable.c.$150 unfavorable.d.$150 favorable.Variable ManufacturingOverhead VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons efficiency variance(EV)for variable manufacturing overhead for the week was:a.$435 unfavorable.b.$435 favorable.c.$15
