Accounting Chapter 10 Notes
Accounting Chapter 10 Notes ACC 204
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This 4 page Class Notes was uploaded by Melanie Guerrero on Sunday April 24, 2016. The Class Notes belongs to ACC 204 at Pace University taught by James Hannon in Spring 2016. Since its upload, it has received 8 views. For similar materials see Managerial Accounting (20014) in Accounting at Pace University.
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Date Created: 04/24/16
Accounting Chapter 10 Notes Setting Direct Materials Standards • Standard quantity per unit – defines the amount of direct materials that should be used for each unit of finished product, including an allowance for normal efficiencies such as scrap and spoilage • Standard price per unit – defines the price that should be paid for each unit of direct materials and it should reflect the final, delivered cost of those materials Ex: Standard direct materials cost per statue: 3.0 pounds per statue × $4.00 per pound = $12.00 per statue Setting Direct Labor Standards • Standard hours per unit – defines the amount of direct-labor hours that should be used to produce one unit of finished goods • Standard rate per hour – defines the company’s expected direct labor wage rate per hour, including employment taxes and fringe benefits Ex: Standard direct labor cost per statue 0.5 direct labor-hours per statue × $22.00 per labor-hour = $11.00 per statues Setting Variable Manufacturing Overhead Standards • Standard cost card – shows the standard quantity (or hours) and standard price (or rate) of inputs required to produce a unit of a specific product • Standard cost card per unit – the standard quantity allowed of an input per unit of a specific product, multiplied by the standard price of the input Standard Cost Variance Analysis • Price Variance – the difference between the actual amount paid for an input and the standard amount that should have been paid, multiplied by the actual amount of the input purchased • Quantity Variance – the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input • Standard quantity allowed (when computing direct materials variances) or standard hours allowed (when computing direct labor and variable manufacturing overhead variances) refers to the amount of an input that should have been used to manufacture the actual output of finished goods produced during the period Standard Quantity allowed for Actual Output = Actual Output × Standard Quantity Materials Price Variance • Measures the difference between an input’s actual price and its standard price, multiplied by the actual quantity purchased Materials Price Variance • Measures the difference between the actual quantity of materials used in production and the standard quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials Labor Rate Variance • Measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the actual number of hours worked during the period Labor Efficiency Variance • Measures the difference between the actual hours used and the standard hours allowed for the actual output, multiplied by the standard hourly rate Manufacturing Overhead Rate and Efficiency Variances • Variable overhead Rate – measures the difference between the actual variable overhead cost incurred during the period and the standard cost that should have been incurred based on the actual activity of the period • Variable overhead efficiency variance – measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate
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