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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:The McGraw-Hill 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
9、Cost VariancesProduct CostStandardThis variance is unfavorablebecause 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
10、 unfavorable variance.But why arevariances important to me?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 CyclePr
11、epare standard cost performance reportConduct next periods operationsAnalyze variancesIdentifyquestionsReceive explanationsTakecorrective actionsBegin The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillStandard Cost VariancesPrice VarianceThe difference betweenthe actual price and thestandard price
12、Standard Cost VariancesQuantity VarianceThe difference betweenthe 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 Varia
13、nceQuantity VarianceStandard price is the amount that should 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 V
14、ariance Analysis Standard quantity is the quantity allowed 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
15、Actual Quantity Actual Quantity Standard Quantity Actual Price 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-
16、Hill Hanson Inc.has the following direct material standard 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
17、.,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.Material VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill What is the actual price per poundpaid for the material?a.$4.00 per pou
18、nd.b.$4.10 per pound.c.$3.90 per pound.d.$6.63 per pound.AP=$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.Mater
19、ial 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.MPV=AQ(AP-SP)MPV=1,700 lbs.($3.90-4.00)MPV=$170 FavorableMaterial VariancesZippy The McGraw-Hill Compan
20、ies,Inc.,2000Irwin/McGraw-Hill The standard quantity of material 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
21、have been used to produce1,000 Zippies is:a.1,700 pounds.b.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.
22、$170 favorable.c.$800 unfavorable.d.$800 favorable.Material 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)M
23、QV=$800 unfavorableMaterial VariancesZippy The McGraw-Hill 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
24、 Actual Price Standard Price Standard PriceMaterial Variances 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 o
25、n the entire quantity purchased.The quantity variance is computed 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 purc
26、hased at a total cost of$10,920,and 1,700 pounds were used 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.=$10,9
27、20 =$11,200 Price variance$280 favorable Price variance increases 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 pe
28、r lb.=$6,800 =$6,000 Quantity variance$800 unfavorableQuantity 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
29、 betteridentify purchasing problems.You accountants just dontunderstand 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
30、responsible for this unfavorable materialquantity variance.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 pri
31、ce,causing unfavorable price variances.The McGraw-Hill Companies,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 st
32、andard hours per Zippy at$6.00 perdirect labor hour Last week 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
33、 hour.b.$6.00 per hour.c.$5.80 per hour.d.$5.60 per hour.Labor 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
34、 per hourZippy 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 unfavorable.d.$300 favorable.Labor VariancesZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Hansons labor rate variance(LRV)for t
35、he week was:a.$310 unfavorable.b.$310 favorable.c.$300 unfavorable.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
36、 is:a.1,550 hours.b.1,500 hours.c.1,700 hours.d.1,800 hours.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
37、 units 1.5 hours per unit SH=1,500 hoursZippy The McGraw-Hill 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
38、Hansons labor efficiency variance(LEV)for the week was:a.$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
39、Hours Actual Rate Standard Rate Standard RateLabor Variances 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 R
40、ate Variance A Closer LookHigh skill,high rateLow skill,low 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
41、-HillLabor Efficiency Variance A Closer LookUnfavorableEfficiencyVariancePoorlytrainedworkersPoorqualitymaterialsPoorlymaintainedequipmentPoorsupervisionof workers The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillResponsibility for Labor VariancesI am not responsible for the unfavorable laboreffi
42、ciency variance!You purchased cheapmaterial,so it took moretime 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 p
43、ersonnel for hiring the wrong peopleand training them poorly.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
44、 Hanson Inc.has the following variable manufacturing overhead 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 Varia
45、nces ExampleZippy The McGraw-Hill Companies,Inc.,2000Irwin/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
46、.,2000Irwin/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 Variances AR=$5,115 1,550 hours AR=$3.30 per hourZippy The McGraw-Hill Companies,Inc.,2000I
47、rwin/McGraw-Hill Hansons spending variance(SV)for variable 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)fo
48、r variable manufacturing overhead forthe week was:a.$465 unfavorable.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 var
49、iance(EV)for variable manufacturing overhead for the week 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
50、for the week was:a.$435 unfavorable.b.$435 favorable.c.$150 unfavorable.d.$150 favorable.Variable ManufacturingOverhead Variances EV=SR(AH-SH)EV=$3.00(1,550 hrs-1,500 hrs)EV=$150 unfavorable1,000 units 1.5 hrs per unitZippy The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillSpending variance$465 un