Chapter 22 - 11-122-122Performance Evaluation Using...

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Unformatted text preview: 11-122-122Performance Evaluation Using Variances from Standard CostsStudent Version11-222-21Describe the types of standards and how they are established.22-211-322-3Unrealistic standards that can be achieved only under perfect operating conditions (such as no idle time, no machine breakdowns, no materials spoilage) are called ideal standardsor theoretical standards.Types of Standards111-422-4Currently attainable standards, sometimes called normal standards,can beattained with reasonable effort. Standards set at this level allow for disruptions, such as material spoilage and machine breakdowns.111-522-52Describe and illustrate how standards are used in budgeting.22-511-622-6The standard cost per unit for direct materials, direct labor, and factory overhead is computed as follows:Standard Cost per Unit = Standard Price Standard Quantity211-722-7Budget Performance ReportThe report that summarizes actual costs, standard cost, and the differences for the units produced is called a budget performance report.211-822-8A favorablecost variance occurs when the actual cost is less than the standard cost (at actual volumes).An unfavorablecost variance occurs when the actual cost exceeds the standard cost (at actual volumes).211-922-9The total direct materials variance is separated into priceand quantityvariances.Direct Materials Variance211-1022-10The total direct labor variance is separated into rateand timevariances.Direct Labor Variance211-1122-113Compute and interpret direct materials and direct labor variances.22-1111-1222-12Direct Materials VariancesActual Direct Materials Cost = Actual Price Actual QuantityActual Direct Materials Cost = $5.50 (7,300 sq. yards.)Actual Direct Materials Cost = $40,150Standard Direct Materials Cost = Standard Standard QuantityStandard Direct Materials Cost = $5.00 (7,300 sq. yards.)Standard Direct Materials Cost = $37,150Actual costs ($40,150) Standard costs ($37,500) = $2,650Total Unfavorable Materials Variance311-1322-13Direct Materials Price VarianceDirect Materials Price Variance = (Actual Price Standard Price) Actual QuantityDirect Materials Price Variance = ($5.50 $5.00) 7,300 sq....
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This note was uploaded on 01/31/2011 for the course BUS 101 taught by Professor Pernia during the Spring '10 term at Essex County College.

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Chapter 22 - 11-122-122Performance Evaluation Using...

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