Ch9 - Cost Management ACCOUNTING AND CONTROL HANSEN&...

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Unformatted text preview: Cost Management ACCOUNTING AND CONTROL HANSEN & MOWEN 9-1 Standard Costing: A Functional-Based Control Approach Control 9 9-2 Developing Unit Input Standards Price standards specify how much should be paid for the quantity of the input to be used. Quantity standards specify how much of the input should be used per unit of output. Unit standard cost is the product of these two standards: Standard price × Standard Quantity (SP × SP) 1 9-3 Developing Unit Input Standards Ideal standards demand 1 maximum efficiency and can be achieved only if everything operates perfectly. Currently attainable standards can be achieved under efficient operating conditions. Kaizen standards reflect a planned improvement and are a type of currently attainable standard. 9-4 Developing Unit Input Standards Usage of Standard Costing Systems Cost Management Planning and Control Decision Making and Product Costing 1 9-5 Developing Unit Input Standards 1 Cost Assignment Approaches 9-6 Standard Cost Sheets Standard Cost Sheet for Deluxe Strawberry Frozen Standard Yogurt Yogurt 2 9-7 Variance Analysis and Accounting: Direct Materials and Direct Labor 3 Total budget variance = (AP × AQ) – (SP × SQ) Performance Report: Total Budget Variances 9-8 Variance Analysis and Accounting: Direct Materials and Direct Labor Price and Usage Variances: Direct Materials 3 MPV = (AP – SP)AQ MUV = (AQ– SQ)SP 9-9 Variance Analysis and Accounting: Direct Materials and Direct Labor Accounting for the Direct Materials Price and Usage Variances Materials (SP × AQ) Direct Materials Price Variance (AP − SP)AQ Accounts Payable (AP × AQ) 15,600 3,900 19,500 3 W ork in Process (SQ × SP) Direct Materials Usage Variance (AQ − SQ)SP Materials (AQ × SP) 15,600 3,900 19,500 9-10 Variance Analysis and Accounting: Direct Materials and Direct Labor 3 Direct materials price variances can be computed at the point 1)when the direct materials are issued into production OR 2)when the materials are purchased. (This method would require AQ to be defined as the actual quantity purchased, rather than actual quantity used. 9-11 Variance Analysis and Accounting: Direct Materials and Direct Labor 3 Direct materials usage variances should be computed as direct materials are issued into production. 9-12 Variance Analysis and Accounting: Direct Materials and Direct Labor Rate and Efficiency Variances: Direct Labor 3 LRV = (AR – SR)AH LRV = (AR – SR)AH 9-13 Variance Analysis and Accounting: Direct Materials and Direct Labor Accounting for the Direct Labor Rate and Efficiency Variances Work in Process (SH × SR) Direct Labor Rate Variance (AR − SR)AH Direct Labor Efficiency Variance (AH − SH)SR Wages Payable (AH × AR) 3 2,400 65 200 2,665 9-14 Variance Analysis and Accounting: Direct Materials and Direct Labor Investigating Direct Materials and Labor Variances: Because random variations around the standard are expected, management should establish an acceptable range of performance. The acceptable range is the standard, plus or minus an allowable deviation. The upper control limit is the standard plus the allowable deviation, and the lower control limit is the standard minus the allowable deviation. 3 9-15 Variance Analysis and Accounting: Direct Materials and Direct Labor Disposition of Direct Materials and Direct Labor Variances - Immaterial Cost of Goods Sold Direct Materials Price Variance Direct Materials Usage Variance Direct Labor Rate Variance Direct Labor Efficiency Variance 4,765 3,900 600 65 200 3 9-16 Variance Analysis and Accounting: Direct Materials and Direct Labor Disposition of Direct Materials and Direct Labor Variances - Material Prime Costs Work in Process Finished Goods Cost of Goods Sold Total $0 3,480 13,920 $17,400 Percentage of Total 0% 20 80 100% 953 3,812 3,900 600 65 200 3 Finished Goods Cost of Goods Sold Direct Materials Price Variance Direct Materials Usage Variance Direct Labor Rate Variance Direct Labor Efficiency Variance 9-17 Variance Analysis: Overhead Costs Variable Overhead Analysis 4 VOHSP= (AVOR – SVOR)AH VOHEV = (AH – SH)SVOR 9-18 Variance Analysis: Overhead Costs Variable Overhead Spending Variance by Item 4 9-19 Variance Analysis: Overhead Costs Variable Overhead Spending and Efficiency Variable Variance by Item Variance 4 9-20 Variance Analysis: Overhead Costs Fixed Overhead Analysis 4 FOHSP= AFOH – BFOH FOHVV = SFOHR × [SH(D) – SH] 9-21 Variance Analysis: Overhead Costs 4 9-22 Variance Analysis: Overhead Costs Graph of Fixed Overhead Variances 4 9-23 Variance Analysis: Overhead Costs Accounting for Overhead Variances To recognize the incurrence of actual overhead: Variable Overhead Control Fixed Overhead Control Miscellaneous Accounts To recognize the variances: Fixed Overhead Control Variable Overhead Efficiency Variance Fixed Overhead Spending Variance Variable Overhead Control Variable Overhead Spending Variance Fixed Overhead Volume Variance 4 7,540 20,500 28,040 3,500 600 500 340 260 4,000 9-24 Variance Analysis: Overhead Costs Accounting for Overhead Variances (continued) To close the variances to Cost of Goods Sold: Fixed Overhead Volume Variance Variable Overhead Spending Variance Cost of Goods Sold Cost of Goods Sold Variable Overhead Efficiency Variance Fixed Overhead Spending Variance 4,000 260 4,260 1,100 600 500 4 9-25 Variance Analysis: Overhead Costs Two-Variance Analysis: Helado Company 4 9-26 Variance Analysis: Overhead Costs Three-Variance Analysis: Helado Company 4 9-27 Mix and Yield Variances: Materials and Labor Standard Mix Information: Direct Materials Direct Material Peanuts Almonds Mix 128 lbs. $64 32 lbs. 32 Mix Proportion 0.80 0.20 SP $0.50 1.00 Standard Cost 5 Total 160 lbs. Yield 120 lbs. $96 Yield ratio: 0.75 (1.20/160) Standard cost of yield (SP): $0.80 per pound ($96/120 pounds of yield) 9-28 Mix and Yield Variances: Materials and Labor 5 Malcom Nut Company produces a batch of 1,600 pounds and produces the following actual results: Direct Material Peanuts Almonds Total Yield Actual Mix 1,120 lbs. 480 1,600 lbs. 1,300 lbs. Percentages 70 % 30 100 % 81.3 % 9-29 Mix and Yield Variances: Materials and Labor 5 Mix Variance = Σ(AQi – SMi)SPi Direct Material AQ SM AQ – SM -160 160 SP $0.50 1.00 (AQ – SM)SP $-80 60 $-80 U Peanuts 1,120 1,280 Almonds 480 320 Mix variance 9-30 Mix and Yield Variances: Materials and Labor Direct Materials Yield Variance Yield variance = (Standard yield – Actual yield) SPy Standard yield = Yield ratio x Total actual inputs Yield variance = (1,200 – 1,300)$0.80 = $80 F 5 9-31 Mix and Yield Variances: Materials and Labor Standard Mix Information Labor Type Shelling Mixing Total Mix 3 hrs. 2 hrs. 5 hrs. Mix Proportion SP 0.60 $ 8.00 0.40 15.00 Standard Cost $24 30 $54 5 Yield 120 lbs. Yield ratio: 24 = (120/5), or 2,400% Standard cost of yield (SPy ): $0.45 per pound ($54/120 pounds of yield) 9-32 Mix and Yield Variances: Materials and Labor 5 Direct Labor Type Shelling Mixing Total Yield *Uses 50 hours as the base. Actual 20 hrs. 30 hrs. 50 hrs. 1,300 lbs. Mix Percentages* 40% 60% 100% 2,600% 9-33 Mix and Yield Variances: Materials and Labor Direct Labor Mix Variance Direct Labor Type AH Shelling 20 Mixing 30 Direct Labor mix variance SM 30 20 AH – SM SP -10 $ 8.00 10 15.00 5 (AH – SM)/SP $-80 150 $-70 U Direct Labor Yield Variance Yield variance = (Standard yield – Actual yield)SPy = [(24 x 50) – 1,300]$0.45 = (1,200 – 1,300)$0.45 = $45 F 9-34 End of Chapter 9 Chapter 9-35 ...
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This note was uploaded on 03/08/2011 for the course ACCT 360 taught by Professor N/a during the Fall '10 term at Mountain State.

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