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    Standard Costing and Variance Analysis: Fall 2007 Crosson

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    Bernard Salonga
    - Direct material variance was favorable at $12,500, as actual cost was less than standard cost - Direct labor variance was unfavorable at $11,250, as actual cost exceeded standard cost - Variable overhead variance was unfavorable at $18,750, as actual cost exceeded standard cost

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    Standard Costing and Variance Analysis: Fall 2007 Crosson

    Uploaded by

    Bernard Salonga
    36 views20 pages
    - Direct material variance was favorable at $12,500, as actual cost was less than standard cost - Direct labor variance was unfavorable at $11,250, as actual cost exceeded standard cost - Variable overhead variance was unfavorable at $18,750, as actual cost exceeded standard cost

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    Chapter 9 Lecture

    Original Title

    Chapter 9 Lecture

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    - Direct material variance was favorable at $12,500, as actual cost was less than standard cost - Direct labor variance was unfavorable at $11,250, as actual cost exceeded standard cost - Variable overhead variance was unfavorable at $18,750, as actual cost exceeded standard cost

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    36 views20 pages

    Standard Costing and Variance Analysis: Fall 2007 Crosson

    Uploaded by

    Bernard Salonga
    - Direct material variance was favorable at $12,500, as actual cost was less than standard cost - Direct labor variance was unfavorable at $11,250, as actual cost exceeded standard cost - Variable overhead variance was unfavorable at $18,750, as actual cost exceeded standard cost

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    © All Rights Reserved
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    Download as ppt, pdf, or txt
    of 20

    Chapter 9

    Standard Costing and


    Variance Analysis

    Fall 2007
    Crosson
    Use only with permission of Susan Crosson
    Learning Objectives:
    ResponsibilityAccounting & Cost Centers
    Cost Performance Evaluation using Master
    and Flexible Budgets
    Standard Costing Basics for Cost Centers
    Performance Evaluation using Standard
    Costing: Spending and Efficiency Variances
    Compute and Analyze DM,DL,VOH, and
    FOH variances
    Use only with permission of Susan Crosson
    Responsibility Accounting:
    An information system that classifies data
    according to a manager’s responsibilities for
    organizational resources

    Cost Center:
    Manager accountable for costs that have
    well-defined relationships between the
    center’s resources and products or
    services.

    Use only with permission of Susan Crosson


    Cost Performance Evaluation using
    Flexible and Master Budgets
    ACTUAL FLEXIBLE MASTER
    PRODUCTION BUDGET BUDGET

    Actual Output Actual Output Estimated Output


    x Actual Quantity x Standard Quantity x Standard Quantity
    x Actual Cost x Standard Cost x Standard Cost

    Use only with permission of Susan Crosson


    What Do You Know?
    Flexible Budget Preparation

    Look and listen to SE5.


    P2 parts 3 & 4

    Use only with permission of Susan Crosson


    P2 Cost Performance Evaluation
    ACTUALPRODUCTION APRIL FLEXIBLE BUDGET MASTER BUDGET
    (46,560) (46,560) (50,000)

    DM $4,975 DM $.10 x 46,560= $4,656.00 DM $5,000


    DL $5,850 DL $.12 x 46,560= $5587.20 DL $ 6,000
    IDL $1,290 IDL $.03 x 46,560= $1396.80 IDL $1,500
    Supplies $ 960 Sup. $.02 x 46,560= $931.20 Sup. $1.000
    VH&P $1,325 VH&P $.03 x 46,560= $1,396.80 VH&P $1,500
    VO $2,340 VO $.05 x 46,560= $2,328.00 VO $2,500
    FH&P $3,500 FH&P $3,500 FH&P $3,500
    Depreciation $4,200 Dep. $4,200 Dep. $4,200
    I&T $1,200 I&T $1,200 I&T $1,200
    FO $1,600 FO $1,600 FO $1,600
    Total $27,240 Total $26,796 Total $28,000
    Use only with permission of Susan Crosson
    Performance Evaluation using
    Flexible and Master Budgets

    ACTUAL FLEXIBLE MASTER


    PRODUCTION BUDGET BUDGET
    Actual Output Actual Output Estimated Output
    x Actual Quantity x Standard Quantity x Standard Quantity
    x Actual Cost x Standard Cost x Standard Cost

    Standard Costing
    Use only with permission of Susan Crosson
    Standard Costing Basics:

    Master Budget Prepared for year


    As part of the Master Budget, Standard
    Quantities and Rates set for Materials, Labor,
    Variable Overhead and Fixed Overhead (i.e.,
    predetermined rates—remember applied OH?
    During year Journal Entries use these Standards
    Managers monitor Cost Centers by computing
    and analyzing Price and Quantity Variances for
    Materials, Labor and Variable Overhead and
    Budget and Volume Variances for Fixed Overhead
    Use only with permission of Susan Crosson
    Material, Labor, and Variable
    Overhead Variances

    ACTUAL FLEXIBLE
    PRODUCTION BUDGET
    Actual Output Actual Quantity Actual Output
    x Actual Quantity x Standard Cost x Standard Quantity
    x Actual Cost x Standard Cost

    Spending or Efficiency
    Price or Rate or Quantity
    Variance Variance

    Use only with permission of Susan Crosson


    Use the following information to answer questions:
    The California Steel Works uses a standard costing system.
    BUDGET: The variable standard ACTUAL: During the past
    cost of producing one case of steel accounting period the
    brackets is: company produced 25,000
    cases and the actual cost
     Direct material (5 pounds @ $1 per case were:
    per pound) $ 5.00
     Direct labor (2 hours @ $2 per  Direct material (5 pounds @
    hour) $ 4.00 $.90 per pound $ 4.50
     Variable overhead (2 hours @  Direct labor ( 2 1/4 hours @
    $3 per hour) $ 6.00 $1.80 per hour) $4.05
     Thus, total variable cost per  Variable overhead
    case $15.00. ($148,750/25,000 cases)
     The predetermined overhead $ 5.95
    rate is $7 per direct labor hour  The actual fixed overhead
    ($3 VOH and $2 FOH). was $105,250.
     Based on a master budget of
    20,000 cases.
    Use only with permission of Susan Crosson
    Material, Labor, and Variable Overhead Variances
    ACTUAL PRODUCTION ACTUAL Quantity AT FLEXIBLE BUDGET
    25,000 cases (AAA) STANDARD Cost (AAS) 25,000 cases (ASS)

    DM: 25,000 x (5 DM: 25,000 x 5 x$1= DM: 25,000 x (5 pounds @


    pounds @ $.90 per $1 per pound)=
    $125,000
    pound)= $112,500 $125,000
    DL: 25,000 x( 2 1/4 DL: 25,000 x 2 1/4 x$2= DL: 25,000 x (2 hours @
    hours @ $1.80 per $2 per hour)=
    $112,500
    hour)= $101,250 $100,000
    VOH: VOH: 25,000 x 2 ¼ x$3= VOH: 25,000 x (2 hours @
    $3 per hour)=
    $148,750 $168,750
    $150,000
    Spending or Efficiency or
    Price or Rate Quantity
    Variance Use only with permission Variance
    of Susan Crosson
    Material, Labor, and Variable
    Overhead Variances

    ACTUAL FLEXIBLE
    PRODUCTION BUDGET
    Actual Output Actual Quantity Actual Output
    x Actual Quantity x Standard Cost x Standard Quantity
    x Actual Cost x Standard Cost

    Favorable or Favorable or
    Unfavorable Spending Unfavorable Efficiency
    or Price or Rate or Quantity Variance
    Variance

    Use only with permission of Susan Crosson


    Crosswalk to Variable Overhead Account

    Variable Overhead
    Actual VOH: Applied VOH:
    Actual Output Actual Output
    x Actual Quantity x Standard Quantity
    x Actual Cost x Standard Cost
    (SAME AS FLEXIBLE BUDGET!!!)

    Underapplied Overapplied
    aka Net Spending & aka Net Spending & Efficiency
    Efficiency Variances Variances

    Dr. COGS xx Dr. OH xx


    Cr. OH xx Cr. COGS xx
    Fixed Overhead Variances
    ACTUAL MASTER or APPLIED OVERHEAD
    PRODUCTION FLEXIBLE
    BUDGET
    Actual Budgeted Actual Output x
    Fixed Fixed Fixed Overhead Rate*
    Overhead Overhead * (Standard Quantity
    x Standard Cost)
    Budget or Volume or
    Spending or Uncontrollable
    Controllable Variance
    Variance
    Use only with permission of Susan Crosson
    Crosswalk to Fixed Overhead Account
    Fixed Overhead
    Actual FOH: Applied FOH:
    Actual Actual Output x
    Fixed Fixed Overhead Rate*

    Overhead * (Standard Quantity


    x Standard Cost)
    Underapplied Overapplied
    aka Net Budget and aka Net Budget and Volume
    Volume Variances Variances
    Dr. COGS xx Dr. OH xx
    Cr. OH xx Cr. COGS xx
    Use the following information to answer questions:
    The California Steel Works uses a standard costing system.
    BUDGET: The variable standard
    cost of producing one case of steel ACTUAL: During the past
    brackets is: accounting period the
    company produced 25,000
     Direct material (5 pounds @ $1 cases and the actual cost
    per pound) $ 5.00 per case were:
     Direct labor (2 hours @ $2 per
    hour) $ 4.00  Direct material (5 pounds @
    $.90 per pound $ 4.50
     Variable overhead (2 hours @
    $3 per hour) $ 6.00  Direct labor ( 2 1/4 hours @
    $1.80 per hour) $4.05
     Thus, total variable cost per
    case $15.00  Variable overhead
    ($148,750/25,000 cases)
     The predetermined overhead
    rate is $7 per direct labor hour $ 5.95
    ($3 VOH and $2 FOH).  The actual fixed overhead
     Based on a master budget of was $105,250.
    20,000 cases.
    Use only with permission of Susan Crosson
    Fixed Overhead Variances
    ACTUAL BUDGET APPLIED
    PRODUCTION (MASTER or OVERHEAD
    FLEXIBLE)
    $100,000*
    $105,250 $80,000* * 25,000 cases x $4/case
    *(20,000 cases x or
    25,000 cases x
    $2/DLH x 2DLH)
    $2/DLH x 2DLH
    Favorable or Unfavorable Favorable or Unfavorable
    Budget or Spending or Volume or Uncontrollable
    Controllable Variance Variance

    Use only with permission of Susan


    Crosson
    What Do You Know?
    Compute and Analyze
    DM,DL,VOH, and FOH variances

    P4
    Look and listen SE6 , SE7, SE8.

    Use only with permission of Susan Crosson


    What Do You Know?
    Variance Analysis

    P3
    P7

    Use only with permission of Susan


    Crosson
    Homework

    P4

    Use only with permission of Susan Crosson

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