Textbook Notes (368,316)
Canada (161,798)
Management (848)
MGT223H5 (26)
Minlei Ye (13)
Chapter 10

MGT223 Chapter10:Standard Costing Notes

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Minlei Ye

MGT223 Chapter10: Standard Costing Standard Costs: benchmarks or “norms” for measuring performance 1. Quantity standards: specify how much of an input should be used to make a product or provide a service 2. Cost (price) standards: specify how much should be paid for each unit of the input Management by Exception: deviations from standards deemed significant are brought to the attention of management Variance Analysis Cycle: 1. Prepare standard cost performance report 2. Analyze variances 3. Identify questions 4. Receive explanations 5. Take corrective actions 6. Conduct next period’s operations 7. Repeat *Budget is set for total costs *Standard is set per unit cost Price and Quantity Standards are determined separately because: 1. The purchasing manager is responsible for raw material purchase prices and production manager is responsible for the quantity of raw material used 2. The buying and using activities occur at different times Variance Analysis Price Variance Quantity Variance difference btwn actual price and standard difference btwn actual quantity and price = AQ x (AP – SP) standard quantity = SP x (AQ – SQ) Actual Quantity is the amount of di
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