Chapter 8 BB

Chapter 8 BB - CHAPTER 08 8-1 Chapter Outline Variance...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: CHAPTER 08 8-1 Chapter Outline Variance Analysis System Standards Setting standards Budgets as standards - Static vs. Flexible Variances Determining Variances for Performance Evaluation Effectiveness Activity (Sales) Volume Variance Efficiency Flexible Budget Variance Manufacturing Cost Variance Analysis Material Variances: Price & Usage Labor Variances: Price & Usage Standard performance level Actual performance level Comparison between standard and actual performance level Variance Variance Analysis System Setting Standards A standard represents the amount a price, cost, or quantity should be , based on certain anticipated circumstances. Accountants, engineers, purchasing agents, and production managers combine efforts to set standards that encourage efficient future production. Engineer Managerial Accountant Setting Standards Should we use ideal standards that represents what costs should be under the best circumstances? Engineer Managerial Accountant I recommend using practical standards that an average worker performing diligently would be able to achieve. Be cautious not to end up with lax standards Check Yourself Which range of difficulty should normally be used to develop standards? A) Ideal standards B) Lax standards C) Practical standards Budgets as Standards - Static Vs. Flexible Budgets Master budget , sometimes called a static budget , is based solely on one level of activity , the planned volume of activity. Flexible budgets differ from static budgets in that they show expected revenues and costs at a variety of volume levels . Both use same standard per unit cost, price & fixed cost Flexible Budgets With very little effort, the accountant can provide management with a flexible budget for both budgeted and actual levels of activity. The flexible budget is a critical tool in effective performance evaluation. Flexible Budgets Melrose Manufacturing, a producer of small high-quality trophies, plans to make and sell 18,000 trophies during 2010. Melrose uses a standard cost system. Below are budgeted data: Lets Prepare the Static Contribution Income Statement Flexible Budgets From the standard cost information, Melrose prepares the following static budget 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 0000000000000000000000000000 18,000 Budgeted Units Unit Selling Price $80 = $1,440,000 18,000 Budgeted Units Unit Variable Cost Budgeted Fixed Cost Lets Prepare the Flexible Contribution Income Statement Flexible Budgets From the standard cost information, Melrose prepares the following static and flexible budgets....
View Full Document

This note was uploaded on 02/22/2012 for the course BUAD 2050 taught by Professor Nicholasw.schroeder during the Spring '09 term at Toledo.

Page1 / 42

Chapter 8 BB - CHAPTER 08 8-1 Chapter Outline Variance...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online