In accounting you can think of it as a budget of a

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In accounting, you can think of it as a budget of a single unit of output What is a standard? 5.2
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Unit 5.2 PRACTICAL IDEAL Tight, but attainable Perfection, “Factory Heaven” Where do you want to be? The standard con8nuum
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Unit ADVANTAGES Motivational tool Constant reminder to workers of need for increased efficiency Ideal standards 5.2 DISADVANTAGES De-motivating because you know you can never achieve the standard Employees may take shortcuts and reduce effectiveness Poor planning tool
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Unit ADVANTAGES Motivate employees to perform Good planning tool Prac8cal standards 5.2 DISADVANTAGES ???
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Unit Standards are set for both quantity and price of each input (materials, labor and overhead) Estimated cost to manufacture a single unit of product or perform a single service A budget for a single unit of output SeHng standards 5.2
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Unit What are the inputs? How much of each input is required? What is the required quality of each input? How much does each unit of input cost? How do you set materials standards? 5.2
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Unit 5.2 C&C direct materials standards
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Unit What are the operations required to produce the product? How long does it take to perform each operation? Who performs each operation and how much are they paid? How do you set labor standards? 5.2
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Unit 5.2 Item Rate Base hourly rate $8.00 Payroll taxes 0.60 Fringe benefits 1.00 Standard direct labor rate $9.60 Activity Direct Labor Hours Cutting .02 Sewing .18 Machine down-time .01 Rest period .03 Standard direct labor hours .25 $9.60 per direct labor hour x .25 direct labor hours = $2.40 C&C direct labor standards
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Unit The predetermined overhead rate How do you set overhead standards? 5.2 $2.40 × 125% = $3.00 per pair
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Unit SeHng the standard 5.2 Exercise 5-6 There are 16 ounces in a pound
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Unit E5-6 solu8on 5.2 Item Standard Cost Commercial cookie mix $0.50 Milk chocolate 1.25 Almonds .75 Mixing labor .24 Baking labor .60 Variable overhead 1.62 Fixed overhead 3.00 Standard cost per pound $7.96 × oz. 16 $0.80 oz. 10 × oz. 16 $4.00 oz. 5 × oz. 16 $12.00 oz. 1 × min. 60 $14.40 min. 1 × min. 60 $18.00 min. 2 × min. 60 $32.40 min. 3 × min. 60 $60.00 min. 3
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Building The Master Budget: The Operating Budget Unit 5.3 C&C Sports
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Unit 5.3 Components of the master budget
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Unit Shows budgeted sales revenue for the period, which flows to the budgeted income statement for the period Begins with the sales forecast, which typically will be prepared by the sales and marketing departments Requires a forecasted sales price in addition to the sales volume forecast Is prepared for each product Sales budget 5.3
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