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Created By: Rachel Moore Not for redistribution. ACCT 2102 April 11, 2016 – April 15, 2016 Chapter 11 Notes Standard Costs and Variances
A standard unit cost is a budget for a singe unit of product. Direct Material • 𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐷𝑀 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝐷𝑀 × 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝐷𝑀 • 2 pounds of DM and DM is $5 per pound ! standard DM unit cost = $10 Direct Labor • 𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐷𝐿 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝐷𝐿 × 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑟𝑎𝑡𝑒 𝑜𝑓 𝐷𝐿 • 5 hours of DL and DL wage rate is $10/hour ! standard SL unit cost = $50 Manufacturing Overhead • 𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑀𝑂𝐻 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑐𝑜𝑠𝑡 𝑑𝑟𝑖𝑣𝑒𝑟 × 𝑃𝑂𝐻𝑅 • 5 hours of DL and POHR of $8 per DL hours ! standard MOH unit cost = $40 Using examples above, determine the standard unit cost… $10 + $50 + $40 = $100 **The standard quantity is als referred to as the input ratio.** The Flexible Budget Variance can be further divided into a Price Variance and a Quantity Variance. • Price/Rate Variance – the difference betweem what we paid and what we expected to pay • Quantity/Efficiency variance – the difference between what we used and expected to use for out actual output In this chapter, (+) and (-) signs are important with variances. A positive variance is an unfavorable variance. A negative variance is a favorable variance. Variances will always be calculated as 𝐴𝐶𝑇𝑈𝐴𝐿 – 𝐵𝑈𝐷𝐺𝐸𝑇. Direct Material Variances DM Price Variance • Difference between what we paid and what we expected to pay for DM • Can first be calculated at point of purchase
Created By: Rachel Moore Not for redistribution. • Responsible party is purchasing manager 𝐷𝑀 𝑝𝑟𝑖𝑐𝑒 = 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑑 × 𝑎𝑐𝑡𝑢𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 – 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑝𝑟𝑖𝑐𝑒 𝐷𝑀 𝑝𝑟𝑖𝑐𝑒 = (𝑞 𝑝𝑢𝑟𝑐ℎ)(𝑎𝑐𝑡𝑢𝑎𝑙 $) – (𝑞 𝑝𝑢𝑟𝑐ℎ)(𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 $) DM Quantity Variance • Difference between the quantity used and the quantity expected for actual output • Can first be calculated at point of production • Responsible party is production manager 𝐷𝑀 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑝𝑟𝑖𝑐𝑒 × (𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑢𝑠𝑒𝑑 – 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑) 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 = 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑖𝑛𝑝𝑢𝑡 𝑟𝑎𝑡𝑖𝑜 × (𝑎𝑐𝑡𝑢𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡) Total DM Variance 𝑇𝑜𝑡𝑎𝑙 𝐷𝑀 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = 𝐴𝑐𝑡𝑢𝑎𝑙 – 𝐵𝑢𝑑𝑔𝑒𝑡 𝑇𝑜𝑡𝑎𝑙 𝐷𝑀 𝑉𝑎𝑟. = (𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑢𝑠𝑒𝑑)(𝑎𝑐𝑡𝑢𝑎𝑙 $) – (𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑)(𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 $) 𝐷𝑀 𝑝𝑟𝑖𝑐𝑒 = 𝑞𝑡𝑦 𝑝𝑢𝑟𝑐ℎ (𝑎𝑐𝑡 $ − 𝑠𝑡𝑑 $) 𝐷𝑀 𝑝𝑟𝑖𝑐𝑒 = 106,000 ($3.15 − $3.20) 𝐷𝑀 𝑝𝑟𝑖𝑐𝑒 = < $5,300 > (𝐹) 𝐷𝑀 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = 𝑠𝑡𝑑 $ 𝑞𝑡𝑦 𝑢𝑠𝑒𝑑 − 𝑞𝑡𝑦 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝐷𝑀 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = $3.20 (104,000 – 20,000 5∗) 𝐷𝑀 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = $12,800 (𝑈) *$16 / $3.20 = 5 lbs/unit 𝑇𝑜𝑡𝑎𝑙 𝐷𝑀 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = (𝑞𝑡𝑦 𝑢𝑠𝑒𝑑)(𝑎𝑐𝑡 𝑝𝑟𝑖𝑐𝑒) – (𝑞𝑡𝑦 𝑒𝑥𝑝)(𝑠𝑡𝑑 𝑝𝑟𝑖𝑐𝑒) 𝑇𝑜𝑡𝑎𝑙 𝐷𝑀 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = (104,000)($3.15) – (100,000)($3.20) 𝑇𝑜𝑡𝑎𝑙 𝐷𝑀 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = $7,600 (𝑈) How would our calculations change if 106,000 pounds of direct material were used during the period? DM quantity would change from $12,800 (U) to $19,200 (U). This would also change the total DM variance to $13,900 (U).
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School: University of Georgia
Course: Principles of Accounting II
Term: Fall 2016
Tags: ACCT2102, Farmer, uga, and Chapter 11
Name: Chapter 11 Notes
Description: These notes cover chapter 11 which was discussed in class April 11th through April 15th.