Chapter 10 Standard Costs and Variances
Standard quantity allowed
The amount of an input that should have been used to complete the period's actual output. Computed by multiplying the actual number of units produced by the standard quantity per unit
Standard quantity per unit
The amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies
Standard hours per unit
The amount of direct-labor hours that should be used to produce one unit of finished goods
Standard rate per hour
The company's expected direct labor wage rate per hour, including employment taxes and fringe benefits; Reflects the expected "mix" of workers
Standard price per unit
The price that should be paid for each unit of direct materials and it should reflect the final, delivered cost of those materials.
Standard cost per unit
The standard quantity allowed of an input per unit of a specific product, multiplied by the standard price of the input
Standard hours allowed
The time that should have been taken to complete the period's output. Computed by multiplying the actual number of units produced by the standard hours per unit.
The planning budget column is based on the _____.
planned output of production
Formula for the standard variable manufacturing overhead per product:
Standard hours per unit X The variable portion of the predetermined overhead rate
Formula for the standard direct materials cost per product:
Standard quantity per unit X Standard price per unit
Calculating spending variances:
Taking the actual results column and subtracting the amounts in the flexible budget column Positive # = Unfavorable Negative # = Favorable
Calculating activity variances:
Taking the amounts in the flexible budget column and subtracting the amounts in the planing budget column Positive # = Unfavorable Negative # = Favorable
Price standards
Specify how much should be paid for each unit of the input
Standard cost variance analysis decomposes spending variances from the flexible budget into two elements:
1) One due to the price paid for the input 2) And the other due to the amount of the input that is used.
Standard
A benchmark for measuring performance
Formula for the standard direct labor cost per product
Standard hours per unit X Standard rate per hour
Materials price variance
Difference between an input's actual price and its standard price, multiplied by the actual quantity purchased. (AQ)(AP-SP) Purchasing manager is responsible
Quantity variance
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. (SP)(AQ-SQ)
Price variance
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. (AQ)(AP-SP)
Materials quantity variance
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. (SP)(AQ-SQ)
Favorable price variance
Indicates that the actual price of the input was less than the standard price per unit
Unfavorable price variance
Indicates that the actual price per unit of the input was greater than the standard price per unit
Unfavorable quantity variance
Indicates that the actual quantity of the input used was greater than the standard quantity allowed
Favorable quantity variance
Indicates that the actual quantity of the input used was less than the standard quantity allowed
Standard cost card
Shows the standard quantity (or hours) and standard price (or rate) of the inputs required to produce a unit of a specific product
Quantity standards
Specify how much of an input should be used to make a product or provide a service; Production manager's responsibility
All three columns in the exhibit are based on the ____ produced during the period.
actual amount of output
Actual results and flexible budget columns are each based on the _____.
actual output of production