Chapter 22 - 22 Performance Evaluation Using Variances from...

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11-1 22-1 22 Performance Evaluation Using Variances from Standard Costs Student Version
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11-2 22-2 1 Describe the types of standards and how they are established. 22-2
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11-3 22-3 Unrealistic standards that can be achieved only under perfect operating conditions (such as no idle time, no machine breakdowns, no materials spoilage) are called ideal standards or theoretical standards . Types of Standards 1
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11-4 22-4 Currently attainable standards , sometimes called normal standards , can be attained with reasonable effort. Standards set at this level allow for disruptions, such as material spoilage and machine breakdowns. 1
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11-5 22-5 2 Describe and illustrate how standards are used in budgeting.
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11-6 22-6 The standard cost per unit for direct materials, direct labor, and factory overhead is computed as follows: Standard Cost per Unit = Standard Price × Standard Quantity 2
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11-7 22-7 Budget Performance Report The report that summarizes actual costs, standard cost, and the differences for the units produced is called a budget performance report . 2
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11-8 22-8 A favorable cost variance occurs when the actual cost is less than the standard cost (at actual volumes). An unfavorable cost variance occurs when the actual cost exceeds the standard cost (at actual volumes). 2
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11-9 22-9 The total direct materials variance is separated into price and quantity variances. Direct Materials Variance 2
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11-10 22-10 The total direct labor variance is separated into rate and time variances. Direct Labor Variance 2
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11-11 22-11 3 Compute and interpret direct materials and direct labor variances. 22-11
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11-12 22-12 Direct Materials Variances Actual Direct Materials Cost = Actual Price × Actual Quantity Actual Direct Materials Cost = $5.50 × (7,300 sq. yards.) Actual Direct Materials Cost = $40,150 Standard Direct Materials Cost = Standard × Standard Quantity Standard Direct Materials Cost = $5.00 × (7,300 sq. yards.) Standard Direct Materials Cost = $37,150 Actual costs ($40,150) – Standard costs ($37,500) = $2,650 Total Unfavorable Materials Variance 3
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11-13 22-13 Direct Materials Price Variance Direct Materials Price Variance = (Actual Price – Standard Price) × Actual Quantity Direct Materials Price Variance = ($5.50 – $5.00) × 7,300 sq.
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