MGMT 201: Chapter 10 Notes
MGMT 201: Chapter 10 Notes MGMT 201
Popular in Managerial accounting
verified elite notetaker
Popular in Business, management
This 2 page Class Notes was uploaded by Zach Weinkauf on Sunday April 3, 2016. The Class Notes belongs to MGMT 201 at Purdue University taught by David Scott in Spring 2016. Since its upload, it has received 49 views. For similar materials see Managerial accounting in Business, management at Purdue University.
Reviews for MGMT 201: Chapter 10 Notes
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 04/03/16
Chapter 10: Standard Costing and Analysis of Direct Costs At the end of an accounting period, after operations are completed, the budget for that period serves a very useful purpose. At that time, managers use the budget as a benchmark against which to compare the results of actual operations Standard Costing and Variance Analysis – tools used by accountants and managers for analyzing. The Cost Control System: Three basic parts - A predetermined or standard performance level - A measure of actual performance - A comparison between standard and actual performance Financial Planning and Analysis “Thermostat” First – A predetermined or standard cost is set o Best estimate of the average cost to produce a single unit of product or service o Starting point for creating relevant budgets Second – the cost-control system measures the actual cost incurred in the production process. Third – the manager compares the actual cost with the budgeted or standard cost o Any difference between the two is called a cost variance, which is then used in controlling costs. Managers focus on quantities and costs that exceed standards Cost standards are set by: Analysis of historical data Task Analysis Practical standards should be set at levels that are currently attainable with reasonable and effiecient effort. Perfection standards are unattainable and therefore discouraging to most employees Cost Variance Analysis: Standard cost variance o Price Variance – the difference between the actual price and the standard price. = Actual Quantity(Actual Price – Standard Price) o Quantity Variance – the difference between the actual quantity and the standard quantity. = Standard Price(Actual Quantity – Standard Quantity) If Actual Material/Labor Cost > Projected Material/Labor Cost = DMPV/DLPV Unfavorable, and vice versa. If Projected Material/Labor Cost > Standard Material/Labor Cost = DMQV/DLPV Unfavorable, and vice versa. DMPV/DLPV=AQ(AP-SP) DMQV/DLQV = SP(AQ-SQ) DMV = DMPV +/- DMQV DMPPV = AQ Purchased(AP-SP) The purchasing manager is responsible for direct material price variances The production manager is responsible for direct material quantity variances
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'