PWRPT C8 Std Costing

PWRPT C8 Std Costing - Chp 8: Standard Costing A Management...

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Chp 8: Standard Costing “A Management Control Tool”
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An Example of Control: Measuring the Success of a diet plan
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New Vocabulary Terms Variance analysis is not a statistical term (forget what you know about the word variance from statistics courses). Variance analysis simply looks at differences between planned and actual events.
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New Vocabulary Terms If Variance analysis investigates differences between planned and actual events, we need to have a plan. One word to describe “the plan” is budget . Another, largely synonymous, term is standard .
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Work Standards Standards describe how work “should be done.” Standards help control a business…when actual performance is much different from standard, managers can investigate why things are “out of control”…this is also known as “ management by exception .”
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Click to edit Master subtitle style Types of Standards Ideal standards --- demand maximum efficiency and can be achieved only if everything operates perfectly Currently attainable standards --- can be achieved under efficient operating conditions
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Example Problem standards per painting: Labor: 20 minutes per painting; $7 wage cost per hour Material: ½ quart of paint per painting; $5 per quart of paint Overhead: $3 per labor hour (variable)
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Actual Results (January). 2,010 paintings were completed. Labor: 700 hours; $6.90 average cost per hour Material: 1,100 quarts purchased at $6 per quart; 975 quarts used. Overhead: $2,200.
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Standard Variance Format Standard Actual What did happen What you thought should have happened
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Typically, we have information about price and quantity Actual Price Actual Quantity Standard Price Standard Quantity
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Actual Price $6.90 /hr. Actual Quantity 700 hrs. Standard Price $7/hr. Standard Quantity 670 hrs. What you thought should have happened:
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This document was uploaded on 10/27/2011 for the course BUSINESS ALL at Texas Tech.

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PWRPT C8 Std Costing - Chp 8: Standard Costing A Management...

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