8. Cost Variances_w8.pdf - AGENDA Direct cost variances AF...

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AF3112 - 2013 1 AF 3112 MANAGEMENT ACCOUNTING 2 Standard Costing: Cost Variances AF3112 - 2013 2 AGENDA Direct cost variances Direct material price variance Direct material efficiency variance Direct labor rate variance Direct labor efficiency variance Interpretation and Journal Entries for Direct Cost Variances Overhead Variances VOH spending variance VOH efficiency variance FOH spending variance FOH volume variance Interpretation and Journal Entries for Overhead Variances AF3112 - 2013 3 Master Budget Variance (for operating income) Summary of Variance Analysis Flexible Budget Variance Sales Volume Variance Selling Price Variance Direct Material Variance Direct Labor Variance Variable Manuf. Overhead Variance Fixed Manuf. Overhead Variance Direct materials price variance Direct materials efficiency variance Direct labor price variance Direct labor efficiency variance A ctual input Q uantity * A ctual P rice A ctual input Q uantity * S tandard P rice S tandard input Q uantity allowed for actual output* S tandard P rice AF3112 - 2013 4 Direct Materials Standards Usage Standards Price Standards Use product design specifications. Use competitive bids for the quality and quantity desired .
AF3112 - 2013 5 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 AF3112 - 2013 6 Variance Analysis Framework Direct Costs 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. AF3112 - 2013 7 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 Variance Analysis Framework Direct Costs AF3112 - 2013 8 Price or Rate Variance Usage or Efficiency Variance Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price Standard quantity is the quantity allowed for the actual good output. Variance Analysis Framework Direct Costs