ACCT 2230 Chapter 10: Chapter 10 Managerial Accounting Notes

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17 Dec 2011

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Standard: a benchmark or a norm for measuring performance. Quantity and cost standards are set for each major input such as raw material and labour time. If actual costs/quantity differs significantly from standards, managers will investigate to find cause of problem and eliminate it = management by exception. Variance analysis cycle: the basic approach to identifying and solving problems. Manufacturing, service, food, and not for profit organizations all make use of standards. Standard cost card: a detailed listing of the standard amounts of materials, labour, and overhead that should go into a unit of product, multiplied by the standard price or rate that has been set for each cost element. Setting price & quantity standards ideally combines the expertise of everyone who has responsibility for purchasing & using inputs. Standards should be designed to encourage efficient future operations not a repetition of past. Ideal standards: those that can be attained only under the best circumstances.

Related Questions

1. What is standard cost?
A. The total number of units times the budgeted amount expected
B. Any amount that appears on a budget
C. The total amount that appears on the budget for product costs
D. The amount management thinks should be incurred to produce a good or service

2. A standard cost is
A. the average cost in an industry.
B. a predetermined cost.
C. the historical cost of producing a product last year
D. a cost which is paid for a group of similar products.

3. The difference between a budget and a standard is that
A. a budget expresses what costs were, while a standard expresses what costs should be.
B. a budget expresses a total amount, while a standard expresses a unit amount.
C. a budget expresses management's plans, while a standard reflects what actually happened.
D. standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

4. Standard costs may be used by
A. universities.
B. governmental agencies.
C. charitable organizations.
D. all of these answers are correct

5. The final decision as to what standard costs should be is the responsibility of
A. management.
B. the quality control engineer.
C. the purchasing agent.
D. the managerial accountants.

6. The most rigorous of all standards is the
A. normal standard.
B. realistic standard.
C. conceivable standard.
D. ideal standard.

7. An unfavorable materials quantity variance would occur if
A. more materials were purchased than were used.
B. actual pounds of materials used were greater than the standard pounds allowed
C. actual pounds of materials used were less than the standard pounds allowed
D. actual labor hours used were greater than the standard labor hours allowed

8. Which of the following statements is true?
A. Variances are the differences between total actual costs and total standard costs.
B. When actual costs exceed standard costs, the variance is favorable.
C. An unfavorable variance results when actual costs are decreasing but standards are not changed.
D. all of the above are true

10. Labor efficiency is measured by the
A. materials quantity variance.
B. labor quantity variance.
C. labor rate variance.
D. total labor variance.

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Standard Product Cost

Hickory Furniture Company manufactures unfinished oak furniture.Hickory uses a standard cost system. The direct labor, directmaterials, and factory overhead standards for an unfinished diningroom table are as follows:

Direct labor:	standard rate	$19 per hr.
	standard time per unit	2.5 hrs.
Direct materials (oak):	standard price	$9.5 per bd. ft.
	standard quantity	19 bd. ft.
Variable factory overhead:	standard rate	$2.8 per direct labor hr.
Fixed factory overhead:	standard rate	$1.2 per direct labor hr.

a. Determine the standard cost per dining roomtable. If required, round your answer to two decimal places.
$per table

b. A standard cost system provides HickoryFurniture management a cost control tool using the principle of .Using this principle, cost deviations from standards can beinvestigated and corrected.

apricotcricket115

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

Inputs	(1) Standard Quantity or Hours		(2) Standard Price or Rate			Standard Cost (1) Ã (2)
Direct materials	6	pounds	$	3	per pound	$	18.00
Direct labor	0.8	hours	$	15	per hour	$	12.00
Variable manufacturing overhead	0.8	hours	$	3	per hour	$	2.40
Total standard cost per unit						$	32.40

	Total		Variances Reported
	Standard Cost*		Price or Rate			Quantity or Efficiency
Direct materials	$	405,000	$	6,900	F	$	9,000	U
Direct labor	$	270,000	$	14,550	U	$	21,000	U
Variable manufacturing overhead	$	54,000	$	1,300	F	$	?	U

*Applied to Work in Process during the period.

The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

Required:

1. How many units were produced last period?

2. How many pounds of direct material were purchased and used in production?

3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

6. How much actual variable manufacturing overhead cost was incurred during the period?

Reference links

Using Standard CostsâDirect Labor Variancesopens in a new window

Using Standard CostsâDirect Materials Variances

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ACCT 2230 Chapter 10: Chapter 10 Managerial Accounting Notes

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