chapter 10 - Standard Costs and the Balanced Scorecard...

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1 Accounting 2102 Standard Costs and the Balanced Scorecard Chapter Ten
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2 Accounting 2102 What do we mean by STANDARDS ? what it should cost to make one unit of our finished product o what’s the difference between a budget and a standard? Budget in total, standard is per unit amt perfection versus practical standards o which can be used as a performance benchmark? o practical
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3 Accounting 2102 Just Kiddin’ Company Just Kiddin’ has determined that each toy it produces requires 1.5 lbs of raw materials. The raw materials can be purchased from suppliers at $4.00 per lb. Labor studies have shown that it takes 1.5 hrs of direct labor to make each toy. Workers in the local job market with the skill set required to make the toys earn approximately $10 per hr. DM standard per toy . . . 1.5 lbs/toy x $4/lb = $6.00/toy DL standard per toy . . . 1.5 hrs/toy x $10/hr = $15.00/toy OH standard per toy . . . first calculate predetermined overhead rate . . . assume $1 per DL hour . . . $1/DL hr x 1.5 hrs/toy = $1.50/toy total cost standard per toy . . . $6.00 + $15.00 + $1.50 = $22.50 In order to calculate GOOD standards, historical data figures AND updated market conditions are needed.
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4 Accounting 2102 Primary Uses of Standard Costs Flexible Budgeting – Ch 11 Pricing= cost + (cost x markup %) Performance Evaluation- Ch 12 Management by Exception- material variance
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5 Accounting 2102 What are VARIANCES ? deviation from standard cost
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chapter 10 - Standard Costs and the Balanced Scorecard...

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