032210_for_posting_2003

032210_for_posting_2003 - CH 9 Standard Costs and Balanced...

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Unformatted text preview: CH 9 Standard Costs and Balanced Scorecards What did it cost? How well did we do? Managers “control”: HOW? compare actual results to a plan (standards) Kattelus - Spring 2010 1 Management by exception A practice whereby managers spend time on “significant” deviations from standards Kattelus - Spring 2010 2 Budget (Standar d) Actual Variance Direct Materials Cost $10,000 $10,20 Direct Labor Cost $56,000 $50,00 Management by exception A practice whereby managers spend time on “significant” deviations from standards Kattelus - Spring 2010 3 Budget (Standar d) Actual Variance Direct Materials Cost $10,000 $10,20 $200 Unfavorable Direct Labor Cost $56,000 $50,00 Management by exception A practice whereby managers spend time on “significant” deviations from standards Kattelus - Spring 2010 4 Budget (Standar d) Actual Variance Direct Materials Cost $10,000 $10,20 $200 Unfavorable Direct Labor Cost $56,000 $50,00 $6,000 Favorable Variance Analysis Cycle • Prepare performance reports for past year to show variances between budget and actual • Interview persons accountable for certain costs to determine why variances occurred • Take corrective action in the current period • Prepare performance report for the current period Kattelus - Spring 2010 Setting standard costs • Standards are unit costs used in a budget as benchmarks for measuring performance • Set by accountants, engineers , purchasing agents, and production managers • Could be ideal or practical standards • Two types of standards: Cost (or price) standards: How much should we pay per unit? Quantity (or efficiency) standards: How many units should we use to make a product? Kattelus - Spring 2010 6 Standard Cost Sheet – Variable Production Costs Kattelus - Spring 2010 7 A A x B Standard Standard Standard Quantity Price Cost Inputs or Hours or Rate per Unit Direct materials 3.0 lbs. 4.00 $ per lb. 12.00 $ Direct labor 2.5 hours 14.00 per hour 35.00 Variable mfg. overhead 2.5 hours 3.00 per hour 7.50 Total standard unit cost 54.50 $ B A General Model for Variance Analysis Kattelus - Spring 2010 8 (AQ × AP) – (AQ × SP) (AQ × SP) – (SQ × SP) AQ = A ctual Q uantity SP = S tandard P rice AP = A ctual P rice SQ = S tandard Q uantity...
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This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Thompson during the Spring '11 term at Michigan State University.

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032210_for_posting_2003 - CH 9 Standard Costs and Balanced...

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