MGT133HW3 - 14­1 Standard cost is what the firm should...

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Unformatted text preview: 14­1 Standard cost is what the firm should incur for an operation Flexible budget is a budget which adjusts revenues and expenses to the actual level achived This means that both of these are estimation but when used together one can perfom short­term profit analysis. 14­6 A good example of changes between standard cost and actual cost is starbucks and their cost for coffe. An abrubt change in coffe beans will chage the actual cost compared to the standard cost. Cost Production 0.9 this shows that the costs was actually 0.8 higher relatively to production 14­7 In other words, he did a bad job 14­9 Any purely variable cost is a function of 2 factors, price and quantity. Thus, any flexible­budget variance for direct labor should be decomposed in to 2 categories Price (rate) variance and Quantity (efficiency) variance. Yes it will affect the direct labor variance in the rate variance and depending if the labor gets less efficient when working overtimes the quantity variance could be indirectly affected 50000 47000 They fell $37,000 short 14­32 Standard Standard Pies/Labor h Wage rate 6 8 24 24 12 12 45000 46000 555000 518000 ­37000 14­12 14­26 Budgeted cost 7840 Hours 8000 Pies Pies made Total hours used Actual Cost 6000 980 8232 Labor efficiencey Actual Wage 6.12 8.4 The usage was higher than expected by 0.12 pies per labor hour but the total cost was higher due to the actual wage rate of $8.4 14­36 a) b) c) Output for the period 15000 Flexible operating income 34000 Standard Budgeted Static budget Variable cost Price Fixed cost 0.67 4 16000 Flexible­budget variance, in terms of contribution margin 20000 Favorable Flexible­budget variance 9000 Favorable Sales volume variance in terms of contribution margin 10000 2750 d) e) ...
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This note was uploaded on 10/21/2010 for the course ECON 1530 taught by Professor Ohly during the Spring '10 term at Dartmouth.

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MGT133HW3 - 14­1 Standard cost is what the firm should...

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