Direct Input Variances and Management Control I Chapter
- Slides: 17
Direct Input Variances, and Management Control: I Chapter 7 2009 Foster School of Business Cost Accounting L. Du. Charme 1
Overview • • • Standards Variances Static vs. Flexible budgets Calculate variances for direct inputs (DM & DL) Eo. P Adjustments When to investigate variances 2009 Foster School of Business Cost Accounting L. Du. Charme 2
Standard = Budget • Here budgeted amount = standard amount. • We will use these terms interchangeably in this course. 2009 Foster School of Business Cost Accounting L. Du. Charme 3
Variances • Variance = budgeted – actual results • If operating income is greater than expected (budget), then you have a favorable variance. • Not all favorable variances are “good. ” 2009 Foster School of Business Cost Accounting L. Du. Charme 4
Static and Flexible Budgets Based on Static Budget Flexible Budget 2009 Foster School of Business Based on Cost Accounting L. Du. Charme Planned level of output at start of the budget period Budgeted revenues and cost based on actual level of output 5
Example Calculate Variances 2009 Foster School of Business Cost Accounting L. Du. Charme 6
Useful Format to Calculate DM and DL Variances Actual Results Actual input X Actual price Budget Flexible Budget Actual input X Budget price Flex-budget input X X Budget price “Noname” Static Budget Static-budget input Budget price 0, 1 |-------- Static Budget Var. --------| 2 |----- Flexible Budget Var. -----|-- Sales Volume Var. --| 3 |---- Price ----|---- Usage ----| 2009 Foster School of Business Cost Accounting L. Du. Charme 7
Price Variance: material Direct-material price variance = Actual price – Budgeted price 2009 Foster School of Business Cost Accounting × L. Du. Charme Actual Quantity used 8
Price Variance: labor Direct-labor price variance = Actual price – Budgeted price 2009 Foster School of Business Cost Accounting × L. Du. Charme Actual Quantity used 9
Efficiency Variance: DM Direct-material efficiency variance = Actual quantity – Standard quantity 2009 Foster School of Business Cost Accounting × L. Du. Charme Standard price 10
Efficiency Variance: labor Direct-labor efficiency variance = Actual quantity – Standard quantity 2009 Foster School of Business Cost Accounting × L. Du. Charme Standard price 11
Example: calculate variances The Boing Company (largest maker of toy airplanes) has provided you with the following data on burppa wood costs for 2004. Burppa wood rots very fast. All wood is used in the period in which it is purchased. Actual Budgeted Toy planes (units) 10, 000 9, 000 Input (bd. ft. ) 5, 200 4, 500 Price ($/bd. ft. ) $0. 49 $0. 50 2009 Foster School of Business Cost Accounting L. Du. Charme 12
Calculation of Variances Please calculate the five variances for burppa wood: – Static-budget variance – Flexible-budget variance – Sales-volume variance – Price variance – Usage (efficiency) variance 2009 Foster School of Business Cost Accounting L. Du. Charme 13
Performance Measurement Using Variances Effectiveness is the degree to which a predetermined objective or target is met. Efficiency is the relative amount of inputs used to achieve a given level of output. Variances should not solely be used to evaluate performance. 2009 Foster School of Business Cost Accounting L. Du. Charme 14
End-of-period Adjustments • Variance accounts are disposed of using one of the approaches outlined in chapter 4. – W/O all to Co. GS – Prorate to Co. GS, FG, & WIP based on: • Ending total $ amount in accounts. • $ amount of IDCost in the respective accounts. (Over- or under-allocated overhead is a variance) 2009 Foster School of Business Cost Accounting L. Du. Charme 15
When to Investigate Variances When should variances be investigated? Subjective judgments Rules of thumb as “investigate all variances exceeding $10, 000 or 25% of expected cost, whichever is lower. ” 2009 Foster School of Business Cost Accounting L. Du. Charme 16
End of Chapter 7 2009 Foster School of Business Cost Accounting L. Du. Charme 17
- Direct labor variances categories
- Variance analysis
- Ap statistics rules for means and variances
- Rules for means and variances
- Standard cost operating statement
- Eta squared statistics
- Comparing two population variances
- Most companies that use standards set them at
- Performance evaluation using variances from standard costs
- Finely tuned input and roughly tuned input
- Perangkat input adalah
- A collection of unorganized facts *
- Direct input python
- Input power control
- Open door policy defintion
- Product control and process control
- Positive control vs negative control gene expression
- Control flow error