Presentation is loading. Please wait.

Presentation is loading. Please wait.

IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 1 The Flexible Budget and Standard Costing Chapter 13 Objectives: Develop and.

Published byMadeline Bryan Modified over 8 years ago

Similar presentations

Presentation on theme: "IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 1 The Flexible Budget and Standard Costing Chapter 13 Objectives: Develop and."— Presentation transcript:

1 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 1 The Flexible Budget and Standard Costing Chapter 13 Objectives: Develop and use flexible budgets to analyze operating results Set proper standard cost for planning, control, and performance evaluation

2 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 2 Effectiveness vs Efficiency An operation is _________ if it has attained or exceeded its goals. An operation is __________ if it has not wasted resources.

3 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 3 Assessing Effectiveness Cheese Company

4 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 4 Flexible Budget  ______________________________________ ______________________________________  Reveal variances due to good cost control or lack of cost control.  Improve performance evaluation.

5 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 5 Flexible Budget Step 1:______________________________ Step 2: :______________________________ in the master budget to calculate the sales revenues and variable expenses. Step 3: Determine the budget amount of fixed cost and compute the flexible budget operating income

6 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 6 Ex: Flexible Budget in Cheese Company

7 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 7 Ex: Flexible Budget in Cheese Company

8 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 8 Assessing Efficiency Ex: Cheese Company

9 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 9 Selling Price Variance A selling price variance is the difference between the total sales revenue received and the total sales revenue of the flexible budget. In the Cheese Company example, the budgeted and actual selling price was $10 per unit. Now assume that the selling price changes to $11 per unit, with all other information unchanged.

10 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 10 Standard Cost Cost ____________________ Standard Costs are ____________________

11 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 11 Standard Cost Variance Product Cost Standard A standard cost variance is the amount by which an actual cost differs from the standard cost. This variance is unfavorable because the actual cost exceeds the standard cost.

12 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 12 Types of Standard An ideal standard demands perfect implementation and maximum efficiency in every aspect of the operation A currently attainable standard sets the performance criterion at a level that a person with proper training and experience can attain most of the time without having to exert extraordinary effort Should we have standards that are difficult to achieve or standards that can be achieved with minimal effort? Standards should be set at levels that are currently attainable with reasonable and efficient effort. Unattainable standards are discouraging while standards that are too easy to achieve provide little motivation.

13 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 13 Standard Source of Standard Non-financial Measure

14 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 14 Direct Material Standards Use product design specifications. Use competitive bids for the quality and quantity desired.

15 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 15 Direct Material Standards The standard material cost for one unit of product is: ×

16 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 16 Direct Labor Standards Efficiency Standards Rate Standards Use time and motion studies for each labor operation. Use wage surveys and labor contracts.

17 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 17 Direct Labor Standard The standard labor cost for one unit of product is: standard number standard wage rate of labor hours for one hour for one unit of product ×

18 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 18 A General Model of Variance Analysis AQ(AP - SP) SP(AQ - SQ) AQ = Actual Quantity SP = Standard Price AP = Actual Price SQ = Standard Quantity Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price Price or Rate Variance Usage or Efficiency Variance

19 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 19 Standard Cost Variances Efficiency VariancePrice Variance The difference between the actual price and the standard price The difference between the actual quantity and the standard quantity

20 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 20 Material Variance Example Determine the followings: What is the actual price per pound paid for the material? What is Hanson’s material price variance (MPV) for the month? What is the standard quantity of material that should have been used to produce 1,000 X’s? What is Hanson’s material usage variance (MUV) for the month? Hanson Inc. has the following direct material standard to manufacture one unit of X: 1.5 pounds per X at $4.00 per pound Last month 1,700 pounds of material were purchased and used to make 1,000 X’s. The material cost a total of $6,630. X

21 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 21 Material Variance Example Actual Quantity Actual Quantity Standard Quantity × × × Actual Price Standard Price Standard Price 1,700 lbs. 1,700 lbs. 1,500 lbs. × × × $3.90 per lb. $4.00 per lb. $4.00 per lb. $6,630 $ 6,800 $6,000 Price variance $170 favorable Usage variance $800 unfavorable X

22 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 22 Labor Variance Example Hanson Inc. has the following direct labor standard to manufacture one X: 1.5 standard hours per X at $12.00 per direct labor hour Last month 1,550 direct labor hours were worked at a total labor cost of $18,910 to make 1,000 X ’ s. X Determine the followings: What is actual rate for labor for the month? What is Hanson’s labor rate variance (LRV) for the month? What are the standard hours (SH) of labor that should have been worked to produce 1,000 X’s? What is Hanson’s labor efficiency variance (LEV) for the month?

23 IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 23 Labor Variance Example Actual Hours Actual Hours Standard Hours × × × Actual Rate Standard Rate Standard Rate Rate variance $310 unfavorable Efficiency variance $600 unfavorable 1,550 hours 1,550 hours 1,500 hours × × × $12.20 per hour $12.00 per hour $12.00 per hour $18,910 $18,600 $18,000 X

Download ppt "IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 1 The Flexible Budget and Standard Costing Chapter 13 Objectives: Develop and."

Similar presentations

Chapter 11 Standard Costs and Variance Analysis

Chapter 11 Standard Costs and Variance Analysis
CHAPTER 10 The Need for Standards Standards Are common in business They are often imposed by government agencies (and called regulations) Standard costs.

CHAPTER 10 The Need for Standards Standards Are common in business They are often imposed by government agencies (and called regulations) Standard costs.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 10 Standard Costing, Operational Performance Measures,

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 10 Standard Costing, Operational Performance Measures,
Chapter 11 Flexible Budgeting and the Management of Overhead and Support Activity Costs Chapter 11: Flexible Budgeting and the Management of Overhead and.

Chapter 11 Flexible Budgeting and the Management of Overhead and Support Activity Costs Chapter 11: Flexible Budgeting and the Management of Overhead and.
Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Chapter Eleven Standard Costs and the Balanced Scorecard.

Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Chapter Eleven Standard Costs and the Balanced Scorecard.
Chapter 15 Fundamentals of Variance Analysis. 15-2 Learning Objectives 4.Prepare and use a profit variance analysis. 2.Develop and use flexible budgets.

Chapter 15 Fundamentals of Variance Analysis Learning Objectives 4.Prepare and use a profit variance analysis. 2.Develop and use flexible budgets.
CHAPTER 15 Cost Analysis for Control. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 15-2 Decision Making Strategic, Operational,

CHAPTER 15 Cost Analysis for Control. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved Decision Making Strategic, Operational,
Cost Analysis for Control

Cost Analysis for Control
Standard Costs and the Balanced Scorecard

Standard Costs and the Balanced Scorecard
7 - 1 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Flexible Budgets, Variances, and Management Control: I Chapter.

7 - 1 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Flexible Budgets, Variances, and Management Control: I Chapter.
Standard Costs 11/16/04 Chapter 10. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Standard Costs Standard Costs are Predetermined. Used for.

Standard Costs 11/16/04 Chapter 10. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Standard Costs Standard Costs are Predetermined. Used for.
Standard Costs Pertemuan 7. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Standard Costs Standard Costs are Predetermined. Used for planning.

Standard Costs Pertemuan 7. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Standard Costs Standard Costs are Predetermined. Used for planning.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.

PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
Lecture 6 Cost Variances for Direct Costs. The derivation of the price and efficiency variances AP ACTUAL COST AQ AP = actual price per unit of input.

Lecture 6 Cost Variances for Direct Costs. The derivation of the price and efficiency variances AP ACTUAL COST AQ AP = actual price per unit of input.
Chapter 41 Cash, Short-term Investments and Accounts Receivable Chapter 4.

Chapter 41 Cash, Short-term Investments and Accounts Receivable Chapter 4.
Budgeting and Standard Cost Systems Chapter 13. Budgeting A budget is a financial and quantitative plan for the acquisition and use of resources Use for.

Budgeting and Standard Cost Systems Chapter 13. Budgeting A budget is a financial and quantitative plan for the acquisition and use of resources Use for.
Chapter 10 The Use of Budgets for Cost Control and Performance Evaluation.

Chapter 10 The Use of Budgets for Cost Control and Performance Evaluation.
Financial and Managerial Accounting

Financial and Managerial Accounting
McGraw-Hill/IrwinCopyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. Fundamentals of Variance Analysis Chapter 16.

McGraw-Hill/IrwinCopyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. Fundamentals of Variance Analysis Chapter 16.
CHAPTER 8 Performance Evaluation. The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin 8-2 Learning Objective LO1 To describe flexible and static budgets.

CHAPTER 8 Performance Evaluation. The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin 8-2 Learning Objective LO1 To describe flexible and static budgets.

Similar presentations

Ads by Google