講義文稿教案lecture week10

1、Management Accounting and Decisions I 2013/14Lecture 10: Standard costing (1 of 2)1ReviewLast week we looked at flexible budgets.This involved adjusting our “static” budget to take into account the actual level of activityFor this we used our knowledge of cost behaviour whether costs (and revenue) a

2、re variable or fixed.This enabled us to do a more useful variance analysis2Today:We will begin to look at standard costing.Standard cost cardTypes of varianceCost reconciliationProfit reconciliationReading3Chapter 17 standard costing and variance analysis 1Recap on absorption costingIn absorption co

3、sting:We sometimes look at budget figuresSometimes look at actual figuresIn the simplified examples, often actual figures are the same as budgetActual results are based on actual data, not budgetexcept where production overhead is often calculated using a pre-determined rateThen we must adjusted for

4、 over- / under-recovery4ExampleWe expected to absorb 20,000 overhead producing 5,000 units ie predetermined rate is 4 per unitActual production is 5,100 units so we put 20,400 (4 x 5,100) into stock or COGSWe actually spent 20,300. We recovered 20,400 so there is over-recovery of 100. 5Overview of s

5、tandard costingIn standard costing,all costs (and perhaps revenues too) are recorded at estimated values.This produces many differences called variances These variances must all be recorded.6Doing this serves a control function measuring and drawing attention to what is going well or badly, compared

6、 with the plan.DefinitionsStandard costs are predetermined target costs per unit that should be incurred under efficient operating conditions.A variance is the difference between the actual cost and the standard cost.7A budget relates to total activity.Here Drury ignores the way variance can also re

7、late to planned or budgeted costs.Elements in a standard costSales priceXDirect material XDirect labour XVariable overhead X variable cost XFixed overhead XTotal costXProfit X8Variance from actualStandard costing variancesVariances can apply to any of the cost typesEach has a particular nameBefore w

8、e look at individual variances, let us establish a general model or pattern for most cost variances.9VariancesWe saw last week how 10lower costsFavourable variancesorhigher revenuehigher costsUnfavourable variancesorlower revenue* Or adverse variances*Causes of higher costs11Adverse Cost VariancesWe

9、 paid more than plannedWe used more than plannedQuantity variancePrice varianceActual costStandard cost and variances12Standard costUsage variance?Price variancequantitycostAPAQSPSQPrice varianceThe buyer is responsibleThe production manager is responsibleWho is responsible?Treated as part of price

10、varianceIn the diagram both price and quantity variance were adverse.Remember that in practice one or both of the variances could be favourable.13A General Model for Variance Analysis 14 (AQ x AP) (AQ x SP)(AQ x SP) (SQ x SP) AQ(AP - SP) SP(AQ - SQ) AQ = Actual Quantity SP = Standard Price AP = Actu

11、al Price SQ = Standard Quantity Price VarianceQuantity Variance Actual Quantity Actual Quantity Standard Quantity Actual Price Standard Price Standard Price15Direct materials cost varianceDirect materials usage varianceDirect materials price variance Quantity(AQ x SP) (SQ x SP) Price (AQ x AP) (AQ x

12、 SP)Material variances16Standard:0.5 kg 3 per kg800 kg, 2,400 Actual production: 1600 units820 kg , 2,378 2,378Actual quantity, standard price820 kgs x 3 = 2,460 2,400 2,460 2,460 = 60 A = 82 F = 22 FoverallOverall: 2,400 2,378 = 22 F17Direct labour cost varianceLabour efficiency varianceLabour rate

13、 varianceLabour variances18 Efficiency(AQ x SP) (SQ x SP) Rate(AQ x AP) (AQ x SP)Standard:15 minutes 16 per hr400 hrs, 6,400 Actual production: 1600 units390 hrs, 6,318 6,318Actual quantity, standard rate390 hours x 16 = 6,240 6,400 6,240 6,240= 160 F = 78 A = 82 F overallOverall: 6,400 6,318 = 82 F

14、Standard hours:Production of 1600 units takes 400 hours, based on 15 minutes (0.25 hours) per unit.This is referred to as 400 standard hours of production.Here (and generally):Standard hours is a measure of production, not of time!1920Variable overhead cost varianceVariable overhead efficiency varia

15、nceVariable overhead rate varianceVariable overhead variances21 Efficiency(AQ x SP) (SQ x SP) Rate(AQ x AP) (AQ x SP)Standard:15 minutes 3 per hr400 hrs, 1,200 Actual production: 1600 units390 hrs, 1,326 1,326Actual quantity, standard rate390 hours x 3 = 1,170 1.200 1,170 1,170= 30 F = 156 A = 126 A

16、 overallOverall: 1,326 1,200 = 126 FVariable / Fixed overhead variancesThe calculations were very similar to the labour rate variances, because the variable overhead is related to a cost driver in this example, labour hours.In fact, the efficiency variance only tells us about the efficiency of using

17、 labour, Both the quantity and the price of these items are reflected in the price variance!Fixed overhead variances work rather differently !For the first time we must take into account the BUDGETED level of activity assuming the standards are based on the budget22Fixed overhead variances23Fixed ov

18、erhead cost varianceFixed overhead volume varianceFixed overhead expenditure * variance * or fixed overhead budget varianceFixed overhead variancesExpenditureVarianceVolumeVarianceFR = Standard Fixed Overhead RateSH = Standard Hours Allowed for actual production SH FR Actual Fixed Budgeted Applied F

19、ixed Overhead Fixed Overhead Overhead 24Fixed overhead variances (units)25Budget VarianceVolumeVariance Actual Fixed Budgeted Applied Fixed Overhead Fixed Overhead Overhead Budget:1500 units3,7502.50 per unitActual : 1600 units 4,050Actual quantity, standard rate1600 x 2.50 = 4,000 4,050 3,750 4,000

20、 300 A 250 F Overall: 4,050 4,000- = 50 AExpenditureVolumeFixed overhead variances (standard hours)26Budget VarianceVolumeVariance Actual Fixed Budgeted Applied Fixed Overhead Fixed Overhead Overhead Budget:375 std hours3,75010 per std hrActual : 400 std hours 4,050Actual quantity, standard rate400

21、x 10 = 4,000 4,050 3,750 4,000 300 A 250 F Overall: 4,050 4,000- = 50 AExpenditureVolumestandard cost total costDirect material 1.50Direct labour 4.00Variable overhead 0.75Fixed overhead 2.50Total cost 8.7527 2,400 6,400 1,200 4,00014,000 1600 units std actual 2,378 6,318 1,326 4,05014,072 2,378 6,3

22、18 1,326 4,05014,072Total cost variances:Direct material Direct labourVariable overhead Fixed overhead Total cost 28 Variances 2,400 6,400 1,200 4,00014,000 1600 units std actual 22 F 82 F 126 A 50 A 72 AAlthough we can see the cost variances from the e statement, a full reconciliation needs to spli

23、t these between price and volumeCost reconciliation statement: 1600 units at standard cost 14,000Material price variance82 FMaterial volume variance60 ALabour rate variance78 ALabour efficiency variance 160 FVariable overhead rate variance 156 AVariable o/h efficiency variance 30 FFixed o/h expendit

24、ure variance 300 AFixed o/h volume variance 250 F72 A 1600 units at actual cost 14,07229Notes on reconciliation statementNotice how when we reconcile costs we are not interested in the budgeted volume.This often causes confusion!We will need to take the budget into account if we reconcile profit.Fir

25、st we must include sales variances.30Calculating margin with std costs:Sales price (std)10.50Direct material 1.50Direct labour 4.00Variable overhead 0.75Fixed overhead2.50Total cost8.75Profit (Sales margin) 1.75 31Sales variances 32Sales variance(in sales margin not sales price)Sales margin volume v

26、arianceSales price variancePrice difference on actual sales, affecting revenue and profitStandard profit lost on difference in sales volume Sales margin Volume(AQ x SM) (Bud QxSM) Sales Price (AQ x AP) (AQ x SP)Sales variances33Budget: 10.50 (SP)1500 units 1.75 (SM)2,625 profitActual sales: 1600 uni

27、ts16,400 16,400Actual quantity, standard price1600 hours x 10.50 = 16,800 2,625 16,800 2,800= 175 F = 400 A = 225 A overallActual quantity, standard margin1600 hours x 1.75 = 2,800Understanding the profit reconciliation34Budgeted profitSales margin volume varianceStandard profit on actual volumeSale

28、s price varianceProfit on actual volume (actual price, std cost)Cost variances (from previous reconciliation)Actual profit+Reconciliation of budgeted and actual profit: Budgeted net profit 2,625Sales price variance400 ASales margin volume variance175 FMaterial price variance 82 FMaterial volume vari

29、ance 60 ALabour rate variance 78 ALabour efficiency variance 160 FVariable overhead rate variance 156 AVariable o/h efficiency variance 30 FFixed o/h expenditure variance 300 AFixed o/h volume variance 250 F 297 A Actual net profit 2,32835Confirmation of actual profitWe have found actual profit from

30、 variances in our reconciliation we havent in fact calculated it yet! Lets do that now: Actual sales16,400Actual costs14,072Net profit2,32836More about reading (ch 17)Drury complicates things by emphasising that variance need to be analysed in terms of responsibility centres.Also in suggesting that

31、actual product costs by product are not useful only periodic analysis by responsibility centre.He discusses at length the purposes of standard costing.37More about reading (ch 17)Drury points out that under variable costing, there is no volume variance for fixed overheads this is because the variance is related to recovery, and we do not recover these overheads through production under variable costing.By presenti