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Difference standards and budgets
- standard is a unit amount. A budget is a total amount
- budget data not journal in cost accounting systems standard yes
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Standard direct materials cost per unit
Std DM Price x Std DM Quantity
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Standard direct labor cost per unit
Std DL Rate x Std DL Hours
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Manufacturing Overhead
- Budgeted Overhead Costs / Expected Standard Activity Index.
- ex: $40,000 / 33,333 hours = 1.2 or 120%
- Predetermined rate is 120% of direct labor cost DLC=$3.25 -->$3.25 x 1.2 = $3.9
- ALT METH: BUD OH $132,000 Std Dir Hrs 26,400=5
- Std hours per unit 2 --> 5x2=10
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Total Material Variance
(AQ x AP) - (SQ x SP)
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Materals Price Variance
AQ x (AP-SP)
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Materals Quantity Variance
SP x (AQ-SQ)
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Causes of Materials Variances
- purchasing department = price paid for raw materials
- materials quantity variance is in the production department
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Total Labor Variances
(AH x AR) - (SH x SR)
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Labor Price Variance
AH x (AR - SR)
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Labor Quanity Variance
SR x (AH - SH)
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Causes of Labor Price Variances
- 1-pying wrkers diff wages than exp 2-misallocation of workers
- Labor quantity variances relate to the efficiency of workers
- traced
- to the production department
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Total Overhead Variance
Actual OH - OH Applied (based on std hours allowed)
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Causes of Manufacturing Overhead Variances
- over or underspending on overhead items = prod dept
- inefficient use of overhead = prod dept
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Balanced scorecard
- 1.Employs both financial and nonfinancial measures. (For example, ROI is a financial measure; employee turnover is a nonfinancial measure.)
- 2.Creates linkages so that high-level corporate goals can be communicated all the way down to the shop floor.
- 3. Provides measurable objectives for such nonfinancial measures as product quality, rather than vague statements
- such as “We would like to improve quality.”
- 4.Integrates all of the company's goals into a single performance measurement system, so that an inappropriate amount of weight will not be placed on any single goal.
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