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MGMT_201_(Ganguly)_Lecture_23

MGMT_201_(Ganguly)_Lecture_23 - MGMT 201(Ganguly MGMT...

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MGMT 201 (Ganguly) MGMT 201 (Ganguly) Lecture 23: Introduction to Lecture 23: Introduction to Standard Costs & Variances Standard Costs & Variances
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2 What is a variance? What is a variance? Standard performance level Actual performance level Comparison between standard and actual performance level Cost variance
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3 Standard Costs Standard Costs Benchmarks for measuring performance. The expected level of performance. Based on carefully predetermined amounts. Used for planning labor and material requirements. Standard Costs are
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4 Management by Exception Management by Exception Direct Material Managers focus on quantities and costs that exceed standards, a practice known as management by exception . Type of Product Cost Amount Direct Labor Standard
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5 Variance Analysis Cycle Variance Analysis Cycle Prepare standard cost performance report. Conduct next period’s operations. Analyze variances. Identify questions. Receive explanations. Take corrective actions. Begin
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6 Cost Variance Analysis Cost Variance Analysis Standard Cost Variances Quantity Variance Price Variance The difference between the actual price and the standard price The difference between the actual quantity and the standard quantity
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7 A General Model for Variance A General Model for Variance Analysis Analysis Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price Price Variance Quantity Variance Standard price is the amount that should have been paid for the resources acquired.
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8 A General Model for Variance
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