AFM102March212011

AFM102March212011 - Introduction to Management Accounting...

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Click to edit Master subtitle style 5/11/11 Introduction to Management Accounting March 21, 2011 Variance Analysis 11
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5/11/11 Key Concepts in Today’s Class Direct materials Material price variance Material quantity variance Direct Labour Labour wage rate variance Labour efficiency variance Variable manufacturing (support) costs 22
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5/11/11 Direct Material Variances The material price variance is calculated as: Price variance = (AP-SP) x AQ Where: AP = actual price of materials SP = standard price of materials AQ = actual quantity of materials purchased
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5/11/11 Direct Material Variances The material quantity variance is calculated as: Quantity variance = (AQ-SQ) x SP Where: AQ = actual quantity of materials used SQ = standard quantity of materials required SP = standard price of materials
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5/11/11 Direct Labour Variances Efficiency variance = (AH-SH) x SR Rate variance = (AR-SR) x AH Where: AH = actual number of direct labour hours AR = actual wage rate & SR = standard rate
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5/11/11 Support Activity Cost Variances Flexible support costs reflect behind- the-scenes operations that are proportional to the volume of activity but are not directly a part of the product or service provided to the customer Flexible support costs consist of a quantity (or use) component and a price component
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5/11/11 10-47 77 The following information is available for Mandalay Company: Actual Materials: 12,000 pounds purchased at $2.50 per pound; used 10,500 pounds Direct labor:
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AFM102March212011 - Introduction to Management Accounting...

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