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POA11e26

# POA11e26 - Ch26 SE1 to SE3 STANDARD COSTING AND VARIANCE...

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Unformatted text preview: Ch26 SE1 to SE3 STANDARD COSTING AND VARIANCE ANALYSIS Chapter 26, SE 1. Standard costing helps managers do their jobs better. Once standard costs have been developed, they can be used in budget preparation and to evaluate prices for direct materials and direct labor during the period. At the end of the period, they are used to identify areas of efficiency and inefficiency through variance analysis. Chapter 26, SE 2. Standard costs provide the following advantages to management: 1. They are useful in preparing operating budgets. 2. They pinpoint production costs that must be more closely controlled. 3. They facilitate the evaluation of managers and workers. 4. They help set realistic prices. 5. They simplify accounting procedures during the accounting period. 6. They can help a company become more efficient and reduce waste. Chapter 26, SE 3. Direct materials cost ( \$10.20 × 5 lbs. ) \$51.00 Direct labor cost ( \$10.75 × 0.2 hrs. ) 2.15 Variable overhead ( \$7.00 × 3 machine hrs.) 21.00 Fixed overhead ( \$11.00 × 3 machine hrs.) 33.00 Total standard unit cost \$107.15 CHAPTER 26 — Solutions Ch26 SE4 Chapter 26, SE 4. need to be calculated: Product 4: \$1,240 ÷ \$26,200 = 4.7% (U) Product 6: \$3,290 ÷ \$41,700 = 7.9% (F) Product 7: \$2,030 ÷ \$34,300 = 5.9% (U) Product 9: \$1,620 ÷ \$32,560 = 5.0% (F) Product 12: \$2,810 ÷ \$59,740 = 4.7% (U) The variances for Products 6 and 7 should be analyzed for cause. Both are beyond company limits. Product 9 is at the limit and may be included in the variances analyzed. Possible causes of variances: Product 6 performance, good results from job training, or new, more efficient machinery. Product 7 poor employee performance, inferior materials, poor supervision, or late delivery of materials. The tolerance in the exercise is + 5 percent. The following percentages Large favorable variance — possible causes include superior employee Unfavorable variance — possible causes include machine breakdown, Ch26 SE5 Chapter 26, SE 5. Variable Units Produced Cost 10,000 12,000 14,000 per Unit Direct materials \$ 100,000 \$ 120,000 \$140,000 \$ 10.00 Direct labor 30,000 36,000 42,000 3.00 Variable overhead 50,000 60,000 70,000 5.00 Total variable costs \$180,000 \$216,000 \$252,000 \$18.00 Total budgeted fixed overhead 80,800 80,800 80,800 Total costs \$260,800 \$296,800 \$332,800 Cost Category Ch26 SE6 Chapter 26, SE 6. = = ( \$10.20 − \$10.00 ) × 55,000 pounds = \$0.20 × 55,000 pounds = \$11,000 (F) = = \$10.20 × [ ( 11,000 × 5 pounds ) − 55,000 pounds ] = \$10.20 × ( 55,000 pounds − 55,000 pounds ) = \$0 Diagram Form: \$550,000 \$561,000 \$561,000 \$11,000 (F) \$0 \$10.00 × 55,000 = \$550,000 \$10.20 × 55,000 = \$561,000 \$10.20 11,000 × 5 ) = \$561,000 Direct Materials Price Variance (Standard Price – Actual Price) × Actual Quantity Direct Materials Quantity Variance Standard Price × (Standard Quantity − Actual Quantity) Actual Price × Actual Quantity Standard Price × Actual Quantity Standard Price × Standard Quantity Direct Materials a Price Variance b Quantity Variance c a b c × ( Ch26 SE7...
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POA11e26 - Ch26 SE1 to SE3 STANDARD COSTING AND VARIANCE...

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