Week5_StandardCosting_StudentCopy_6SlidesPerPage_Wk5_2011

Week5_StandardCosting_StudentCopy_6SlidesPerPage_Wk5_2011 -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Standard costs and Variance Analysis Linda Chang Lecturer Learning objectives 1. Explain how standard costing can be used to help control and manage resources 2. Describe and understand how to set standards 3. Understand the difference between ideal and currently attainable standards, and their impact on behaviour 2 4. Develop standard costs for direct material and direct labour 5. Calculate and interpret Direct Material and Direct Labour variances 6. Understand how to determine the causes of variances, and when to take corrective actions 7. Describe some behavioural effects of standard costing systems Required Readings Mowen et. Al Chapter 9 Exclude learning objectives 5 and 6. 3 Lecture Outline 1. Cost control overview 2. Setting standards Direct materials standards 4 Direct labour standards 3. Variance analysis Direct materials variance Direct labour variance 4. Investigating and controlling variances Cost control overview Planning and control – ensure that plan and objectives are achieved Control systems provide regular information to assist in control, which is an essential part LO1 5 of effective resource management Necessary requirements for control A predetermined or standard performance level A measure of actual performance; and A comparison between standard performance and actual performance Investigate causes of significant variances Cost control overview Standard costing is a part of the budgetary control system A predetermined or standard costs are developed A standard cost is a budgeted cost of one unit of product Includes cost of direct material, direct labour and overhead Product costing Performance evaluation 6
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Lecture Outline 1. Cost control overview 2. Setting standards Direct materials standards 7 Direct labour standards 3. Variance analysis Direct materials variance Direct labour variance 4. Investigating and controlling variances How are standards developed? Historical experience Provide a good basis for predicting future costs Caution: may include past operating inefficiencies. Engineering studies LO2 8 Can determine the most efficient way to operate Caution: but can be too rigorous. Participative standard setting Inputs from operating personnel Personnel should have significant input as they are responsible for achieving the standards. Caution: budgetary slack Types of Standards Two types of standards: Ideal standards Currently attainable standards LO3 9 Ideal standards Demand maximum efficiency. Reflect minimum attainable costs under nearly perfect operation conditions 10 Issues to consider: Motivate people Is it achievable? Will it cause dysfunctional behaviour?
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/24/2011 for the course ECON 1203 taught by Professor James during the Spring '11 term at National Institute of Technology, Calicut.

Page1 / 9

Week5_StandardCosting_StudentCopy_6SlidesPerPage_Wk5_2011 -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online