RSM222H1 Lecture : Textbook Notes on Chapter 10+11-Standard Costing and Flexible Budget

67 views2 pages
5 Aug 2010
School
Department
Course
Chapter 10
2 reasons why price and quantity standards are determined separately:
1) purchasing manager = responsible for RM purchase prices, production manager =
responsible for quantity of RM used
2) buying and using activities occur @ different times; RM purchases may be held in
LQYIRUDSHULRGRIWLPHEHIRUHEHLQJXVHGLQSURG¶Q
Mix/Yield Variance:
- used when production process requires input of more than one material (material
quantity variance ±MQV ± can be further broken down into mix/yield)
Mix ± dollar effect of a difference between the actual mix of materials and the
budgeted mix of materials on total materials cost
Yield ± portion of efficiency variance that is not the mix variance; occurs when actual
yield differs from the standard yield expected from a given mix of inputs
- production managers = responsible for labour variances; they influence:
o mix of skill levels assigned to work tasks
o level of employee motivation
o quality of production supervision
o quality of training provided to employees
Chapter 11
Static Budget ± designed for only one level of activity
Flexible Budget ± designed to cover range of activity + can be used to develop budgeted
cost at any point within that range to compare to actual costs incurred
- shows costs that should have been incurred at the actual level of activity
- reveal variances related to cost control
- improve performance evaluation
Flexible Performance Report:
- flexible budget = prepared for same activity level as actually achieved
Selecting an activity base for an OH flexible budget:
1) activity base and variable OH should be causally related
2) activity base should be simple and easily understood
3) activity base should not be expressed in dollars or other currency
If flexible budget based on:
1) Actual Hours - only SPENDING variance computed
2) Standard Hours ± SPENDING and EFFICIENCY variance computed
(***USUALLY based on units of product/# of customers served)
Spending Variance ± results from paying more or less than expected for OH items and
from excessive usage of OH items
www.notesolution.com
Unlock document

This preview shows half of the first page of the document.
Unlock all 2 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Used when production process requires input of more than one material (material quantity variance mqv can be further broken down into mix/yield) Mix dollar effect of a difference between the actual mix of materials and the budgeted mix of materials on total materials cost. Yield portion of efficiency variance that is not the mix variance; occurs when actual yield differs from the standard yield expected from a given mix of inputs. Production managers = responsible for labour variances; they influence: level of employee motivation: mix of skill levels assigned to work tasks, quality of production supervision, quality of training provided to employees. Static budget designed for only one level of activity. Selecting an activity base for an oh flexible budget: activity base and variable oh should be causally related, activity base should be simple and easily understood, activity base should not be expressed in dollars or other currency.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents