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TU - ACCT 2123 - Class Notes - Week 5

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TU - ACCT 2123 - Class Notes - Week 5

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background image Concepts in Accounting Information II – Spring 2017 CHAPTER 9:
Standard Costing and 
Variances
Standard Cost Systems A. Based on carefully predetermined amounts.
B. Used for planning labor, material, and overhead requirements.
C. The expected level of performance.
D. Benchmarks for measuring performance.
E. In a standard cost system, all manufacturing costs are recorded at 
standard rather than actual amounts. 1. Describe the standard-setting process and explain how  standard costs relate to budgets and variances. Ideal versus Attainable Standards A. Should we use ideal standards that require employees to work at 100% peak efficiency? B. I recommend using attainable standards that can be achieved with  reasonable and efficient effort. Types of Standards A Quantity Standard – The amount of input that should be used in each  unit of product or service. B Price Standard – The price that should be paid for a specific quantity of  input. 2. Prepare a flexible budget and show how total costs  change with sales volume. Master Budgets Versus Flexible Budgets
background image Variance Analysis C Variances are the difference between total costs and total costs and  total standard costs. D Actual costs < Standard costs = Favorable variance E Actual costs > Standard costs = Unfavorable variance F Causes of Favorable Variances i. Paying a lower price than expected for direct materials. ii. Using less direct materials than expected. iii. Paying a lower rate than expected for direct labor. iv. Producing a unit in less time than expected. v. Paying less than expected for manufacturing overhead costs. vi. Using less of a variable overhead resource than expected. vii. Producing more using a fixed overhead resource than expected. B. Causes of Unfavorable Variances i. Paying a higher price than expected for direct materials. ii. Using more direct materials than expected. iii. Paying a higher rate than expected for direct labor. iv. Producing a unit in more time than expected. v. Paying more than expected for manufacturing overhead costs. vi. Using more of a variable overhead resource than expected. vii. Producing less using a fixed overhead resource than expected. Comparing Actual Results to the Master Budget 2

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School: University of Tulsa
Department: OTHER
Course: Concepts in Accounting Information 2
Professor: Ben Holman
Term: Spring 2017
Tags:
Name: ACCT-2123, Chapter 9 Notes
Description: These notes cover the material in Chapter 9.
Uploaded: 02/23/2017
5 Pages 9 Views 7 Unlocks
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