6 - Lecture 6 The Flexible Budget and Standard Costing Direct Materials and Direct Labor II Direct Materials Standards Price Standards Usage

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Lecture 6 The Flexible Budget and Standard Costing: Direct Materials and Direct Labor - II
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Direct Materials Standards Usage Standards Price Standards Use product design specifications. Use competitive bids for the quality and quantity desired .
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The standard material cost for one unit of product is: standard quantity standard price for of material one unit of material required for one unit of product × Direct Materials Standards
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Efficiency Standards Rate Standards Use time and motion studies for each labor operation. Use wage surveys and labor contracts. Direct Labor Standards
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The standard labor cost for one unit of product is: standard number standard wage rate of labor hours for one hour for one unit of product × Direct Labor Standards
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A General Model for Variance Analysis Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price Price or Rate Variance Usage or Efficiency Variance The total variance is the flexible budget variance.
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A General Model for Variance Analysis Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price Standard price is the amount that should have been paid for the resources acquired. Price or Rate Variance Usage or Efficiency Variance
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Price or Rate Variance Usage or Efficiency Variance A General Model for Variance Analysis Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price Standard quantity is the quantity allowed for the actual good output.
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AQ(AP - SP) SP(AQ - SQ) AQ = Actual Quantity SP = Standard Price AP = Actual Price SQ = Standard Quantity A General Model for Variance Analysis A ctual Q uantity A ctual Q uantity S tandard Q uantity × × × A ctual P rice S tandard P rice S tandard P rice Price or Rate Variance Usage or Efficiency Variance
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Standard Cost Variances Standard Cost Variances Efficiency Variance Price Variance The difference between the actual price and the standard price The difference between the actual quantity and the standard quantity
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Standard Costs Let’s use the concepts of the general model to calculate standard cost variances, starting with direct material.
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Hanson Inc. has the following direct
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This note was uploaded on 01/16/2010 for the course AF AF 3112 taught by Professor Woo-jonglee during the Spring '08 term at Polytechnic University of Puerto Rico.

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6 - Lecture 6 The Flexible Budget and Standard Costing Direct Materials and Direct Labor II Direct Materials Standards Price Standards Usage

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