AFM102 Chapter Notes - Chapter 10: White Chocolate, Deutsche Luft Hansa, Standard Streams

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cyanbat359

3 Apr 2016

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM102

Professor

Jie Joyce Tian

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Document Summary

Standard costs: represent specific elements of budgets, such as direct materials, or direct labour requirements, as well as overhead projections. Serves as both a planning and a control function. In managerial accounting, standards relate to the quantity and cost of inputs used in manufacturing goods or providing services. Note: actual quantities and cost of inputs are periodically compared to standards. Standard cost record: shows the standard quantities and costs of the inputs required to produce a unit of a specific product. Cost=standard quantity of each input required produce one unit of output price for the input. Ideal standards: can only be attained only under the best circumstances o no breakdowns, shortages, strikes: practical standards: standards that already take into consideration problems that likely occur including shipping, discounts, waste, etc. Management by exception: any time actual results deviates from the standards, and deemed significant, it is brought to the attention of the appropriate manager as exceptions and they investigate the discrepancy.

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.

tanpanda195

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.

	Standard Cost per Unit		Actual Cost per Unit
Direct materials:
Standard: 1.80 feet at $2.40 per foot	$	4.32
Actual: 1.75 feet at $2.60 per foot			$	4.55
Direct labor:
Standard: 0.90 hours at $14.00 per hour		12.60
Actual: 0.95 hours at $13.40 per hour				12.73
Variable overhead:
Standard: 0.90 hours at $3.00 per hour		2.70
Actual: 0.95 hours at $2.60 per hour				2.47
Total cost per unit	$	19.62	$	19.75
Excess of actual cost over standard cost per unit			$	0.13

The production superintendent was pleased when he saw this report and commented: âThis $0.13 excess cost is well within the 1 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product."

Actual production for the month was 10,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.

Required:

1. Compute the following variances for May:

a. Materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

b. Labor rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

c. Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

2. How much of the $0.13 excess unit cost is traceable to each of the variances computed in (1) above. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)

3. How much of the $0.13 excess unit cost is traceable to apparent inefficient use of labor time? (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations. Round your final answers to 2 decimal places.)

burgundygnu503

Bramlett Company has several divisions and just built a newplant with a capacity of 20,000 units of a new product. A standardcosting system has been introduced to aid in evaluating managers'performance and for establishing a selling price for the newproduct. At the present time, Bramlett faces no competitors in thisproduct market, and managers priced it at standard variable andfixed manufacturing cost, plus 60% mark-up. Managers hope thisprice will be maintained for several years.

During the first year of operations, 1,000 units per month willbe produced. During the second year, production is estimated to be1,500 units per month. In the first month of operations, employeeswere learning the processes, so direct labour hours were estimatedto be 20% greater than the standard hours allowed per unit. Insubsequent months, employees were expected to meet the directlabour hours standards.

Experience in other plants and with similar products ledmanagers to believe that variable manufacturing costs would vary inproportion to actual direct labour dollars. For the first severalyears, only one product will be manufactured in the new plant.Fixed overhead costs of the new plant per year are expected to be$1,920,000, incurred evenly throughout the year.

The standard variable manufacturing cost (after the break-inperiod) per unit of product has been set as follows:

Direct materials (4 pieces @ $20 per piece) $ 80
Direct labour (10 hours @ $25 per hour) 250
Variable overhead (50% of direct labour cost) 125
Total $455

At the end of the first month of operations, the actual costsincurred to make 950 units of product were as follows:

Direct materials (3,850 pieces @ $19.80) $ 76,230
Direct labour (12,000 hours @ $26) 312,000
Variable overhead 160,250
Fixed overhead 172,220

Bramlett managers want to compare actual costs to standard toanalyze and investigate variances and take any correctiveaction.

REQUIRED
A. What selling price should Bramlett set for the new productaccording to the new pricing policy? Explain.
B. Using long-term standard costs, compute all direct labour andmanufacturing overhead variances.
C. Is it reasonable to use long-term standard costs to calculatevariances for the first month of operations? Why or why not?
D. Revise the variance calculations in Part B, using the expectedcosts during the first month of operations as the standardcosts.
E. Provide at least two possible explanations for each of thefollowing variances:
1. Direct labour price variance
2. Direct labour efficiency variance
3. Variable overhead spendingvariance
4. Fixed overhead spending variance

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AFM102 Chapter Notes - Chapter 10: White Chocolate, Deutsche Luft Hansa, Standard Streams

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