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SLchap010
Course: BUAD 250B, Fall 2008School: USC
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Word Count: 604
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10 Chapter Standard Costing Standard Cost Card Variable Production Cost A standard cost card for one unit of product might look like this: A Standard Quantity or Hours 3.0 lbs. 2.5 hours 2.5 hours B Standard Price or Rate AxB Standard Cost per Unit 12.00 35.00 7.50 54.50 Inputs Direct materials Direct labor Variable mfg. overhead Total standard unit cost McGraw-Hill/Irwin $ 4.00 per lb. $ 14.00 per hour 3.00...
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10 Chapter Standard Costing
Standard Cost Card Variable Production Cost
A standard cost card for one unit of product might look like this:
A
Standard Quantity or Hours
3.0 lbs. 2.5 hours 2.5 hours
B
Standard Price or Rate
AxB
Standard Cost per Unit
12.00 35.00 7.50 54.50
Inputs
Direct materials Direct labor Variable mfg. overhead Total standard unit cost
McGraw-Hill/Irwin
$ 4.00 per lb. $ 14.00 per hour 3.00 per hour $
The McGraw-Hill Companies, Inc., 2003
A General Model for Variance Analysis
Actual Quantity Actual Price Actual Quantity Standard Price Standard Quantity Standard Price
Price Variance
Quantity Variance
Standard price is the amount that should have been paid for the resources acquired.
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
A General Model for Variance Analysis
Actual Quantity Actual Price Actual Quantity Standard Price Standard Quantity Standard Price
Price Variance
AQ(AP - SP)
AQ = Actual Quantity AP = Actual Price
McGraw-Hill/Irwin
Quantity Variance
SP(AQ - SQ)
SP = Standard Price SQ = Standard Quantity
The McGraw-Hill Companies, Inc., 2003
Material Variances Example
Glacier Peak Outfitters has the following direct material standard for the fiberfill in its mountain parka.
0.1 kg. of fiberfill per parka at $5.00 per kg.
Last month 210 kgs of fiberfill were purchased and used to make 2,000 parkas. The material cost a total of $1,029.
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Material Variances Summary
Actual Quantity Actual Price
210 kgs. $4.90 per kg.
Actual Quantity Standard Price
210 kgs. $5.00 per kg.
Standard Quantity Standard Price
200 kgs. $5.00 per kg.
= $1,029
= $1,050
= $1,000
Price variance $21 favorable
Quantity variance $50 unfavorable
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Material Variances Summary
Actual Quantity Actual Price
210 kgs. $4.90 per kg.
Actual Quantity Standard Price
210 kgs. $1,029 kgs 210 $5.00 per kg. = $4.90 per kg
Standard Quantity Standard Price
200 kgs. $5.00 per kg.
= $1,029
= $1,050
= $1,000
Price variance $21 favorable
Quantity variance $50 unfavorable
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Note: Using the formulas
Materials price variance
MPV = AQ (AP - SP) = 210 kgs ($4.90/kg - $5.00/kg) = 210 kgs (-$0.10/kg) = $21 F
Materials quantity variance
MQV = SP (AQ - SQ) = $5.00/kg (210 kgs-(0.1 kg/parka 2,000 parkas)) = $5.00/kg kgs (210 - 200 kgs) = $5.00/kg (10 kgs) = $50 U
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Labor Variances Example
Zippy
Hanson Inc. has the following direct labor standard to manufacture one Zippy:
1.5 standard hours per Zippy at $12.00 per direct labor hour
Last week 1,550 direct labor hours were worked at a total labor cost of $18,910 to make 1,000 Zippies.
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Quick Check
Zippy
Hanson's labor rate variance (LRV) for the week was: a. $310 unfavorable. b. $310 favorable. LRV c. $300 unfavorable. = AH(AR - SR) LRV = 1,550 hrs($12.20 - $12.00) d. $300 favorable. = $310 unfavorable LRV
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Quick Check
Hanson's labor efficiency variance (LEV) for the week was: a. $590 unfavorable. b. $590 favorable. c. $600 unfavorable. d. $600 favorable.
Zippy
LEV = SR(AH - SH) LEV = $12.00(1,550 hrs - 1,500 hrs) LEV = $600 unfavorable
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Labor Variances Summary
Actual Hours Actual Rate
1,550 hours $12.20 per hour
Zippy
Actual Hours Standard Rate
1,550 hours $12.00 per hour
Standard Hours Standard Rate
1,500 hours $12.00 per hour
= $18,910
= $18,600
= $18,000
Rate variance $310 unfavorable
McGraw-Hill/Irwin
Efficiency variance $600 unfavorable
The McGraw-Hill Companies, Inc., 2003
Quick Check
Zippy
Hanson's spending variance (VOSV) for variable manufacturing overhead for the week was: a. $465 unfavorable. b. $400 favorable. SV = AH(AR - SR) c. $335 unfavorable. = 1,550 hrs($3.30 - $3.00) SV d. $300 favorable. SV = $465 unfavorable
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Quick Check
Zippy
Hanson's efficiency variance (VOEV) for variable manufacturing overhead for the week was: a. $435 unfavorable. b. $435 favorable. 1,000 units 1.5 hrs per unit c. $150 unfavorable. d. $150 favorable. = SR(AH - SH) EV
EV = $3.00(1,550 hrs - 1,500 hrs) EV = $150 unfavorable
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc., 2003
Variable Manufacturing Overhead Variances
Actual Hours Actual Rate
1,550 hours $3.30 per hour
Zippy
Actual Hours Standard Rate
1,550 hours $3.00 per hour
Standard Hours Standard Rate
1,500 hours $3.00 per hour
= $5,115
= $4,650
= $4,500
Spending variance $465 unfavorable
McGraw-Hill/Irwin
Efficiency variance $150 unfavorable
The McGraw-Hill Companies, Inc., 2003
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