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

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 usesbudgets to monitorand controloperations. Develop the budgetfrom planned objectives. Compareactual with budget andanalyze anydifferences. Take corrective andstrategic actions. Reviseobjectivesand preparea newbudget.Budgetary Control and ReportingP121-*Improve performance evaluation.May be prepared for any activity level in the relevant range.Show revenues and expensesthat should have occurred at theactual 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 changein direct proportion to changes in activity.Total fixed costs remainunchanged within therelevant range. FixedVariablePreparing Flexible BudgetsP121-*Benchmarks formeasuring performance.The expected levelof performance.Based on carefullypredetermined amounts.Used for planning labor, materialand overhead requirements.Standard Costs are Standard CostsC 121-*Use product design specifications.Use competitivebids for the qualityand quantity desired.QuantityStandardsSetting Direct Material StandardsPriceStandardsC 121-*Setting Direct Labor StandardsUse time and motion studies foreach labor operation.Use wage surveys andlabor contracts.TimeStandardsRateStandardsC 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 StandardsActivityStandardsRateStandardsC 121-*Type of Product CostAmountManufacturingOverheadDirectMaterialDirectLaborStandard costA standard cost varianceis the amount by whichan actual cost differs fromthe standard cost.VariancesP221-*Prepare standard cost performance reportConduct next period’s operationsAnalyze variancesIdentifyquestionsReceive explanationsTakecorrective actionsBeginVariance AnalysisP221-*Standard Cost VariancesComputing VariancesQuantity VariancePrice VarianceThe difference betweenthe actual price and thestandard priceThe difference betweenthe actual quantity andthe standard quantityP221-*UnfavorableEfficiencyVariancePoorlytrainedworkersPoorsupervisionof workersPoorqualitymaterialsPoorlymaintainedequipmentP2Labor Variances21-*Overhead RateContains a variableunit rate which staysconstant at all levelsof activity.Contains a fixedoverhead rate whichdeclines as activitylevel increases.Function of activity levelchosen to determine rate.Setting Overhead StandardsP321-*TotalOverheadVarianceVariableOverheadFixedOverheadEfficiencyVarianceSpendingVarianceVolumeVarianceSpendingVarianceControllableVarianceOverhead Variance AnalysisP321-*End of Chapter 2121-*