StandardCostsandOperatingPerformanceMeasures

Chapter10StandardCostsBenchmarksfor

measuringperformance.Theexpectedlevel

ofperformance.Basedoncarefully

predeterminedamounts.Usedforplanninglabor,material

andoverheadrequirements.Standard

CostsareStandardCostsDirect

MaterialManagersfocusonquantitiesandcosts

thatexceedstandards,apracticeknownas

managementbyexception.TypeofProductCostAmountDirect

LaborManufacturing

OverheadStandard

Accountants,engineers,personneladministrators,andproductionmanagerscombineeffortstosetstandardsbasedonexperienceandexpectations.

SettingStandardCostsSettingStandardCostsShouldweuse

practicalstandards

oridealstandards?EngineerManagerial

AccountantSettingStandardCostsPracticalstandards

shouldbesetatlevels

thatarecurrently

attainablewith

reasonableand

efficienteffort.Production

managerSettingStandardCostsIagree.

Idealstandards,thatarebasedonperfection,are

unattainableanddiscouragemostemployees.Human

Resources

ManagerSettingDirectMaterialStandardsQuantity

StandardsUseproduct

designspecifications.Price

StandardsFinal,delivered

costofmaterials,

netofdiscounts.SettingDirectLaborStandardsRate

StandardsUsewage

surveysand

laborcontracts.Time

StandardsUsetimeand

motionstudiesfor

eachlaboroperation.SettingVariableOverheadStandardsRate

StandardsTherateisthe

variableportionofthe

predeterminedoverhead

rate.Activity

StandardsTheactivityisthe

baseusedtocalculatethepredeterminedoverhead.StandardCostCard–VariableProductionCost

Astandardcostcardforoneunitofproductmightlooklikethis:Arestandardsthesameasbudgets?A

standard

istheexpectedcostforoneunit.Abudget

istheexpectedcostforallunits.Standardsvs.BudgetsStandardCostVariancesProductCostStandardThisvarianceis

unfavorable

becausetheactualcost

exceedsthestandardcost.

Astandardcostvarianceistheamountbywhich

anactualcostdiffersfromthestandardcost.StandardCostVariancesIseethatthere

isanunfavorablevariance.Butwhyare

variances

importanttome?First,theypointtocausesof

problemsanddirections

forimprovement.Second,theytrigger

investigationsindepartments

havingresponsibility

forincurringthecosts.VarianceAnalysisCyclePreparestandardcostperformancereportConductnextperiod’soperations

Analyzevariances

Identify

questions

ReceiveexplanationsTake

correctiveactionsBeginStandardCostVariancesPriceVarianceThedifferencebetween

theactualpriceandthe

standardpriceStandardCostVariancesQuantityVarianceThedifferencebetween

theactualquantityand

thestandardquantityAGeneralModelforVarianceAnalysis

ActualQuantityActualQuantity StandardQuantity

×××

ActualPriceStandardPriceStandardPricePriceVarianceQuantityVarianceStandardpriceistheamountthatshouldhavebeenpaidfortheresourcesacquired.PriceVarianceQuantityVariance

ActualQuantityActualQuantity StandardQuantity

×××

ActualPriceStandardPriceStandardPriceAGeneralModelforVarianceAnalysisStandardquantityisthequantityallowedfortheactualgoodoutput.AGeneralModelforVarianceAnalysis

AQ(AP-SP)SP(AQ-SQ)AQ=ActualQuantity

SP

=StandardPrice

AP

=ActualPrice

SQ=StandardQuantity

PriceVarianceQuantityVariance

ActualQuantityActualQuantity StandardQuantity

×××

ActualPriceStandardPriceStandardPriceStandardCostsLet’susethegeneralmodeltocalculatestandardcostvariances,startingwith

directmaterial.

HansonInc.hasthefollowingdirectmaterialstandardtomanufactureoneZippy:1.5poundsperZippyat$4.00perpound

Lastweek1,700poundsofmaterialwerepurchasedandusedtomake1,000Zippies.Thematerialcostatotalof$6,630.MaterialVariancesExampleZippy

Whatistheactualpriceperpound

paidforthematerial? a. $4.00perpound. b. $4.10perpound. c. $3.90perpound. d. $6.63perpound.MaterialVariancesZippy

Whatistheactualpriceperpound

paidforthematerial?

a. $4.00perpound. b. $4.10perpound. c. $3.90perpound.

d. $6.63perpound.AP=$6,630÷1,700lbs.

AP=$3.90perlb.MaterialVariancesZippy

Hanson’smaterialpricevariance(MPV)

fortheweekwas: a. $170unfavorable. b. $170favorable. c. $800unfavorable. d. $800favorable.MaterialVariancesZippy

Hanson’smaterialpricevariance(MPV)

fortheweekwas:

a. $170unfavorable. b. $170favorable.

c. $800unfavorable. d. $800favorable.

MPV=AQ(AP-SP)

MPV=1,700lbs.×($3.90-4.00)

MPV=$170FavorableMaterialVariancesZippy

Thestandardquantityofmaterialthat

shouldhavebeenusedtoproduce

1,000Zippiesis: a. 1,700pounds. b. 1,500pounds. c. 2,550pounds. d. 2,000pounds.MaterialVariancesZippy

Thestandardquantityofmaterialthat

shouldhavebeenusedtoproduce

1,000Zippiesis:

a. 1,700pounds.

b. 1,500pounds.

c. 2,550pounds. d. 2,000pounds.

SQ=1,000units×1.5lbsperunit

SQ=1,500lbsMaterialVariancesZippy

Hanson’smaterialquantityvariance(MQV)

fortheweekwas: a. $170unfavorable. b. $170favorable. c. $800unfavorable. d. $800favorable.MaterialVariancesZippy

Hanson’smaterialquantityvariance(MQV)

fortheweekwas:

a. $170unfavorable. b. $170favorable. c. $800unfavorable.

d. $800favorable.

MQV=SP(AQ-SQ)

MQV=$4.00(1,700lbs-1,500lbs)

MQV=$800unfavorableMaterialVariancesZippy1,700lbs.1,700lbs.1,500lbs.

×××

$3.90perlb.$4.00perlb.$4.00perlb.

=

$6,630=$6,800=$6,000

Pricevariance

$170favorableQuantityvariance

$800unfavorable

ActualQuantityActualQuantity StandardQuantity

×××

ActualPriceStandardPriceStandardPriceMaterialVariancesSummaryZippyMaterialVariancesHansonpurchasedandused1,700pounds.Howarethevariancescomputediftheamountpurchased

differsfromtheamountused?

Thepricevarianceiscomputedontheentirequantity

purchased.Thequantityvarianceiscomputedonlyonthequantity

used.

HansonInc.hasthefollowingmaterialstandardtomanufactureoneZippy:1.5poundsperZippyat$4.00perpound

Lastweek2,800poundsofmaterialwerepurchasedatatotalcostof$10,920,and1,700poundswereusedtomake1,000Zippies.MaterialVariancesContinuedZippy

ActualQuantityActualQuantity

Purchased

Purchased

××

ActualPriceStandardPrice2,800lbs.2,800lbs.

××

$3.90perlb.$4.00perlb.=$10,920=$11,200Pricevariance

$280favorablePricevarianceincreasesbecausequantitypurchasedincreases.MaterialVariancesContinuedZippy

ActualQuantity

UsedStandardQuantity

××

StandardPriceStandardPrice1,700lbs.1,500lbs.

××

$4.00perlb.$4.00perlb.=$6,800=$6,000Quantityvariance

$800unfavorableQuantityvarianceisunchangedbecauseactualandstandardquantitiesareunchanged.MaterialVariancesContinuedZippyIsolationofMaterialVariancesIneedthepricevariance

soonersothatIcanbetter

identifypurchasingproblems.Youaccountantsjustdon’t

understandtheproblemsthat

purchasingmanagershave.I’llstartcomputing

thepricevariance

whenmaterialis

purchasedratherthan

whenit’sused.ResponsibilityforMaterialVariancesIamnotresponsiblefor

thisunfavorablematerial

quantityvariance.Youpurchasedcheap

material,somypeople

hadtousemoreofit.Youusedtoomuchmaterialbecauseofpoorlytrainedworkersandpoorlymaintainedequipment.Also,yourpoorschedulingsometimesrequiresmetorushordermaterialatahigherprice,causingunfavorablepricevariances.StandardCostsNowlet’scalculatestandardcostvariancesfordirectlabor.

HansonInc.hasthefollowingdirectlaborstandardtomanufactureoneZippy:

1.5standardhoursperZippyat$6.00per

directlaborhour

Lastweek1,550directlaborhourswereworkedatatotallaborcostof$9,610tomake1,000Zippies.LaborVariancesExampleZippy

WhatwasHanson’sactualrate(AR)

forlaborfortheweek? a. $6.20perhour. b. $6.00perhour. c. $5.80perhour. d. $5.60perhour.LaborVariancesZippy

WhatwasHanson’sactualrate(AR)

forlaborfortheweek? a. $6.20perhour.

b. $6.00perhour. c. $5.80perhour. d. $5.60perhour.LaborVariances

AR=$9,610÷1,550hours

AR=$6.20perhourZippy

Hanson’slaborratevariance(LRV)fortheweekwas: a. $310unfavorable. b. $310favorable. c. $300unfavorable. d. $300favorable.LaborVariancesZippy

Hanson’slaborratevariance(LRV)fortheweekwas: a. $310unfavorable. b. $310favorable. c. $300unfavorable. d. $300favorable.LaborVariances

LRV=AH(AR-SR)

LRV=1,550hrs($6.20-$6.00)

LRV=$310unfavorableZippy

Thestandardhours(SH)oflaborthat

shouldhavebeenworkedtoproduce

1,000Zippiesis: a. 1,550hours. b. 1,500hours. c. 1,700hours. d. 1,800hours.LaborVariancesZippy

Thestandardhours(SH)oflaborthat

shouldhavebeenworkedtoproduce

1,000Zippiesis:

a. 1,550hours.

b. 1,500hours.

c. 1,700hours. d. 1,800hours.LaborVariances

SH=1,000units×1.5hoursperunit

SH=1,500hoursZippy

Hanson’slaborefficiencyvariance(LEV)

fortheweekwas: a. $290unfavorable. b. $290favorable. c. $300unfavorable. d. $300favorable.LaborVariancesZippy

Hanson’slaborefficiencyvariance(LEV)

fortheweekwas:

a. $290unfavorable. b. $290favorable. c. $300unfavorable.

d. $300favorable.LaborVariances

LEV=SR(AH-SH)

LEV=$6.00(1,550hrs-1,500hrs)

LEV=$300unfavorableZippy

ActualHoursActualHours StandardHours

×××

ActualRateStandardRateStandardRateLaborVariancesSummaryRatevariance

$310unfavorableEfficiencyvariance

$300unfavorable

1,550hours1,550hours1,500hours

×××

$6.20perhour$6.00perhour$6.00perhour

=$9,610=$9,300=$9,000

ZippyLaborRateVariance–

ACloserLookHighskill,

highrateLowskill,

lowrateUsinghighlypaidskilledworkersto

performunskilledtasksresultsinan

unfavorableratevariance.Productionmanagerswhomakeworkassignments

aregenerallyresponsibleforratevariances.LaborEfficiencyVariance–

ACloserLookUnfavorable

Efficiency

VariancePoorly

trained

workersPoor

quality

materialsPoorly

maintained

equipmentPoor

supervision

ofworkersResponsibilityforLaborVariancesIamnotresponsiblefor

theunfavorablelabor

efficiencyvariance!Youpurchasedcheap

material,soittookmore

timetoprocessit.Youusedtoomuchtimebecauseofpoorlytrainedworkersandpoorsupervision.ResponsibilityforLaborVariancesMaybeIcanattributethelabor

andmaterialvariancestopersonnel

forhiringthewrongpeople

andtrainingthempoorly.StandardCostsNowlet’scalculatestandardcostvariancesforthelastofthevariableproductioncosts–

variablemanufacturingoverhead.

HansonInc.hasthefollowingvariablemanufacturingoverheadstandardto

manufactureoneZippy:

1.5standardhoursperZippyat$3.00per

directlaborhour

Lastweek1,550hourswereworkedtomake1,000Zippies,and$5,115wasspentfor

variablemanufacturingoverhead.VariableManufacturing

OverheadVariancesExampleZippy

WhatwasHanson’sactualrate(AR)forvariablemanufacturingoverheadrate

fortheweek? a. $3.00perhour. b. $3.19perhour. c. $3.30perhour. d. $4.50perhour.VariableManufacturing

OverheadVariancesZippy

WhatwasHanson’sactualrate(AR)forvariablemanufacturingoverheadrate

fortheweek?

a. $3.00perhour. b. $3.19perhour. c. $3.30perhour.

d. $4.50perhour.VariableManufacturing

OverheadVariances

AR=$5,115÷1,550hours

AR=$3.30perhourZippy

Hanson’sspendingvariance(SV)forvariablemanufacturingoverheadfor

theweekwas: a. $465unfavorable. b. $400favorable. c. $335unfavorable. d. $300favorable.VariableManufacturing

OverheadVariancesZippy

Hanson’sspendingvariance(SV)forvariablemanufacturingoverheadfor

theweekwas: a. $465unfavorable.

b. $400favorable. c. $335unfavorable. d. $300favorable.VariableManufacturing

OverheadVariances

SV=AH(AR-SR)

SV=1,550hrs($3.30-$3.00)

SV=$465unfavorableZippy

Hanson’sefficiencyvariance(EV)forvariablemanufacturingoverheadfortheweekwas: a. $435unfavorable. b. $435favorable. c. $150unfavorable. d. $150favorable.VariableManufacturing

OverheadVariancesZippy

Hanson’sefficiencyvariance(EV)forvariablemanufacturingoverheadfortheweekwas:

a. $435unfavorable. b. $435favorable. c. $150unfavorable.

d. $150favorable.VariableManufacturing

OverheadVariances

EV=SR(AH-SH)

EV=$3.00(1,550hrs-1,500hrs)

EV=$150unfavorable1,000units×1.5hrsperunitZippySpendingvariance

$465unfavorableEfficiencyvariance

$150unfavorable1,550hours1,550hours1,500hours

×××

$3.30perhour$3.00perhour$3.00perhour

=$5,115=$4,650=$4,500

ActualHoursActualHours StandardHours

×××

ActualRateStandardRateStandardRateVariableManufacturing

OverheadVariancesZippyVariableManufacturingOverheadVariances–ACloserLookIfvariableoverheadisappliedonthebasis

ofdirectlaborhours,thelaborefficiency

andvariableoverheadefficiencyvariances

willmoveintandem.Largervariances,indollaramountorasapercentageofthestandard,areinvestigatedfirst.VarianceAnalysisandManagementbyExceptionHowdoIknowwhichvariancestoinvestigate?AdvantagesofStandardCostsManagementby

exceptionImprovedcostcontrol

andperformance

evaluationBetterInformation

forplanningand

decisionmakingPossiblereductions

inproductioncostsAdvantagesPotential

ProblemsEmphasisonnegative

mayimpactmorale.Emphasizingstandards

mayexcludeother

importantobjectives.Favorablevariances

maybemisinterpreted.Continuous

improvement

maybemore

importantthan

meetingstandards.Standardcost

reportsmay

notbetimely.Laborquantitystandards

andefficiencyvariances

maynotbeappropriate.TheBalancedScorecardManagementtranslatesitsstrategyintoperformancemeasuresthatemployeesunderstandandaccept.Performance

measuresFinancialCustomersLearning

andgrowthInternal

business

processesTheBalancedScorecardHowdowelook

totheowners?Howcanwe

continuallylearn,

grow,andimprove?Inwhichinternal

businessprocesses

mustweexcel?Howdowelook

tocustomers?TheBalancedScorecardLearningimproves

businessprocesses.Improvedbusiness

processesimprove

customersatisfaction.Improvingcustomer

satisfactionimproves

financialresults.Processtimeistheonlyvalue-addedtime.DeliveryPerformanceMeasuresWaitTimeProcessTime+InspectionTime

+MoveTime+QueueTime

OrderReceivedProduction

StartedGoodsShippedDeliveryCycleTimeThroughputTimeDeliveryPerformanceMeasuresManufacturingCycleEfficiency

Value-addedtime

Manufacturingcycletime=WaitTimeThroughputTimeProcessTime+InspectionTime

+MoveTime+QueueTime

OrderReceivedProduction

StartedGoodsShippedDeliveryCycleTimeEndofChapter10《化妝品術(shù)語(yǔ)》起草情況匯報(bào)中國(guó)疾病預(yù)防控制中心環(huán)境與健康相關(guān)產(chǎn)品安全所一、標(biāo)準(zhǔn)的立項(xiàng)和下達(dá)時(shí)間2006年衛(wèi)生部政法司要求各標(biāo)委會(huì)都要建立自己的術(shù)語(yǔ)標(biāo)準(zhǔn)。1ONE二、標(biāo)準(zhǔn)經(jīng)費(fèi)標(biāo)準(zhǔn)研制經(jīng)費(fèi)：3.8萬(wàn)三、標(biāo)準(zhǔn)的立項(xiàng)意義術(shù)語(yǔ)標(biāo)準(zhǔn)有利于行業(yè)間技術(shù)交流、提高標(biāo)準(zhǔn)一致性、消除貿(mào)易誤差，作為標(biāo)準(zhǔn)體系中的基礎(chǔ)標(biāo)準(zhǔn)，術(shù)語(yǔ)標(biāo)準(zhǔn)在各個(gè)領(lǐng)域的標(biāo)準(zhǔn)體系中均起著