CH 10 LS

advantages to using a standard cost system include:

-standards can provide benchmarks for individuals to judge their own performance -standard costs can simplify bookkeeping

when setting DL standards:

-the production manager should be contacted -it's best to use tight but attainable standards -time and motion studies may be used

what is the purchasing manager generally responsible for?

material price variance

what is the production manager generally responsible for?

material quantity variance

what's used to calculate the standard quantity per unit of DM?

-allowance for waste and spoilage -DM requirements per unit of finished product

Excessive inventory on hand, especially in the WIP inv acct, may lead to :

-high defect rates -inefficient operations -obsolete goods

the materials price variance is generally calculated at the time materials are purchased because:

-it simplifies bookkeeping -management can generate more timely variance reports -it allows materials to be carried in the inventory accounts at standard cost

what accounts are impacted by closing standard variance clearing accounts?

-retained earnings -cost of goods sold

where are any transaction that impact net operating income recognized?

retained earnings