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Ch11 Q 2 & 11 - budget data are not journalized in...

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2. (a) Explain the similarities and differences between standards and budgets. In concept, standards and budgets are essentially the same. Both are predetermined costs, and both contribute to management planning and control. There is a difference, however, in the way the terms are expressed. A standard is a unit amount. A budget is a total amount. A standard is the budgeted cost per unit of product. A standard is therefore concerned with each individual cost component that makes up the entire budget. Both standards and budgets are predetermined costs. The primary difference is that a standard is a unit amount, whereas a budget is a total amount. A standard may be regarded as the budgeted cost per unit of product. (b) Contrast the accounting for standards and budgets. There are important accounting differences between budgets and standards. Except in the application of manufacturing overhead to jobs and processes,
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Unformatted text preview: budget data are not journalized in cost accounting systems. In contrast, standard costs may be incorporated into cost accounting systems. Also, a company may report its inventories at standard cost in its financial statements, but it would not report inventories at budgeted costs. 11. In the direct labor variance matrix, there are three factors: (1) Actual hour’s * Actual rate, (2) Actual hour’s * Standard rate, (3) Standard hour’s *Standard rate. Using the numbers, indicate the formulas for each of the direct labor variances. There are 2 direct labor variances - rate variance and time variance. Rate variance is given as: (Actual Rate * Actual hours) – (Standard rate * Actual hours) this is (1) - (2) Time Variance is given as (Actual Hours * Standard Rate) – (Standard Hours * Standard Rate) this is (2)-(3)...
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