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Notes Ch 11 - Busi 101 Notes Chapter 11 Standard Costs and...

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Busi 101 Notes Chapter 11 Standard Costs and Balanced Scorecard I. The Need for Standards a. Standard Costs: Predetermined unit costs, which companies use as measures of performance. b. Distinguishing b/w Standards and Budgets i. Standard = A unit amount ii. Budget = A total amount iii. A standard is the budgeted cost per unit of product. II. Setting Standard Costs a. Direct Materials i. Direct Materials Price Standard (SP): The cost per unit of direct materials that should be incurred. Should be the purchasing dept’s best estimate of the cost of raw materials . ii. Direct Materials Quantity Standard (SQ): The quantity of direct materials that should be used per unit of finished goods. iii. SDMC (Standard Direct Materials Cost)/Unit = SP x SQ b. Direct Labor i. Direct Labor Price Standard (SP) = The rate per hour that should be incurred for direct labor. Standard is based on current wage rates, adjusted for anticipated changes. ii. Direct Labor Quantity Standard (SQ) = The time that should be required to make one unit of the product.
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