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Chapter 10

ACCT 2230 Chapter Notes - Chapter 10: Unemployment Benefits


Department
Accounting
Course Code
ACCT 2230
Professor
Lynn Carty
Chapter
10

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ACCT2230 Chapter 10 Notes
Standard costs and overhead analysis
Definitions:
Management by exception: a system of management in which standards are set for various
operating activities that are then periodically compared to actual results. Any differences that are
deemed significant are brought to the attention of management as “exceptions”
Standard cost record: a detailed listing of the standard amount 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
Ideal standards: standards that allow for no machine breakdowns or other work interruptions
and that require peak efficiency at all times
Practical standards: standards that allow for normal machine downtime and other work
interruptions and can be attained through reasonable, although highly efficient, efforts by the
average employees
Standard price per unit: the price that should be paid for a single unit of materials, including
shipping, receiving, and other such costs, net of any discounts allowed
Standard quantity per unit: the amount of materials that should be required to complete a
single unit of product, including allowances for normal waste, spoilage, and other inefficiencies
Standard rate per hour: the labour rate that should be incurred per hour of labour time,
including employment insurance, employee benefits, and other labour costs
Standard hours per unit: the amount of labour time that should be required to complete a
single unit of product, including allowances for breaks, machine downtime, clean up, rejects,
and other normal inefficiencies
Standard cost per unit: the standard cost of a unit of product as shown on the standard cost
card; it is computed by multiplying the standard quantity or hours by the standard price or rate
for each cost element
Variance: the difference between standard prices and quantities and actual prices and
quantities
Standard quantity allowed: the amount of materials that should have been used to complete
the period’s output, as computed by multiplying the actual number of units produced by the
standard quantity per unit
Standard hours allowed: the time that should have been taken to complete the period’s
output, as computed by multiplying the actual number of units produced by the standard hours
per unit
Materials price variance: a measure of the difference between the actual unit price paid for an
item and the standard price, multiplied by the quantity purchased (AQ * AP) – (AQ * SP)
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