Kế toán, kiểm toán - Chapter 21: Flexible budgets and standard costing

P1: Prepare a flexible budget and interpret a flexible budget performance report. P2: Compute materials and labor variances. P3: Compute overhead variances. P4A: Prepare journal entries for standard costs and account for price and quantity variances.

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Financial and Managerial AccountingWild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 21Flexible Budgets and Standard CostingConceptual Learning ObjectivesC1: Define standard costs and explain how standard cost information is useful for management by exception .21-*A1: Analyze changes in sales from expected amounts.Analytical Learning Objectives21-*P1: Prepare a flexible budget and interpret a flexible budget performance report.P2: Compute materials and labor variances.P3: Compute overhead variances.P4A: Prepare journal entries for standard costs and account for price and quantity variances.Procedural Learning Objectives21-*Management uses budgets to monitor and control operations. Develop the budget from planned objectives. Compare actual with budget and analyze any differences. Take corrective and strategic actions. Revise objectives and prepare a new budget.Budgetary Control and ReportingP121-*Improve performance evaluation.May be prepared for any activity level in the relevant range.Show revenues and expenses that should have occurred at the actual level of activity. Reveal variances due to good costcontrol or lack of cost control.Purpose of Flexible BudgetsP121-* To a budget for different activity levels, we must know how costs behave with changes in activity levels.Total variable costs change in direct proportion to changes in activity.Total fixed costs remain unchanged within the relevant range. FixedVariablePreparing Flexible BudgetsP121-*Benchmarks for measuring performance.The expected level of performance.Based on carefully predetermined amounts.Used for planning labor, material and overhead requirements.Standard Costs are Standard CostsC 121-*Use product design specifications.Use competitive bids for the quality and quantity desired.Quantity StandardsSetting Direct Material StandardsPrice StandardsC 121-*Setting Direct Labor StandardsUse time and motion studies for each labor operation.Use wage surveys and labor contracts.Time StandardsRate StandardsC 121-*The activity is the cost driver used to calculate the predetermined overhead.The rate is the variable portion of the predetermined overhead rate.Setting Variable Overhead StandardsActivity StandardsRate StandardsC 121-*Type of Product CostAmountManufacturing OverheadDirect MaterialDirect LaborStandard costA standard cost variance is the amount by which an actual cost differs from the standard cost.VariancesP221-*Prepare standard cost performance reportConduct next period’s operations Analyze variances Identify questions Receive explanationsTake corrective actionsBeginVariance AnalysisP221-*Standard Cost VariancesComputing VariancesQuantity VariancePrice VarianceThe difference between the actual price and the standard priceThe difference between the actual quantity and the standard quantityP221-*Unfavorable Efficiency VariancePoorly trained workersPoor supervision of workersPoor quality materialsPoorly maintained equipmentP2Labor Variances21-*Overhead RateContains a variable unit rate which stays constant at all levels of activity.Contains a fixed overhead rate which declines as activity level increases.Function of activity level chosen to determine rate.Setting Overhead StandardsP321-*Total Overhead VarianceVariable OverheadFixed OverheadEfficiency VarianceSpending VarianceVolume VarianceSpending VarianceControllable VarianceOverhead Variance AnalysisP321-*End of Chapter 2121-*