ELECTIVE PRELIMS Flashcards
Standard costs are predetermined or _____ set by management for various purposes like product
costing, pricing, budgeting, cost control, motivation, and performance measurement.
targeted costs
Standards are similar to budgeted amounts stated on a ___ basis, but standards differ from budgets in that they actually appear in general ledger accounts, while budgeted amounts do not.
per unit
Because of the impact of the fixed costs in most businesses, a standard costing system is usually not effective unless the company uses a _____ system.
flexible budgeting
presume perfect efficiency and 100% capacity and hence not useful for control purposes as they are not practically attainable.
IDEAL/THEORETICAL Standards
based on higher-than-average levels of efficiency, but are clearly achievable and hence typically used for employee motivation, product costing and budgeting.
CURRENTLY ATTAINABLE/PRACTICAL Standards
Standards based on historical information are ___ as this practice may perpetuate past inefficiencies.
not used
Standards can be used in both
process costing and job-order costing systems
usually indicates the quantity of raw materials or labor time required to produce a unit of product. This is normally expressed per unit of
output
Quantity Standard
usually indicates what the peso amount of the quantity standard should be. This is normally expressed per unit of input
Cost Standard
Standard costs are systematically ___ costs established by management to be used as a basis for comparison with actual cost.
pre-determined
When standard costs are used for inventory valuation, variances are:
written-off to cost of goods sold
If immaterial/insignificant
When standard costs are used for inventory valuation, variances are:
allocated to ending working-process, finished goods, and cost of goods sold
If material/significant
Under _____, managers focus attention on results that materially deviate from expectations. Results that are close to expectations (e.g.bimmaterial variances) do not require investigation.
management by exception
Materials Quantity Variance (MQV) =
(AQ – SQ) SO
Materials Price Variance (MPV) =
AQ (AP – SP)
Labor Efficiency Variance (LEV) =
(AH – SH) SR
Labor Rate Variance (LRV) =
AH (AR – SR
Materials Mix Variance (MMV) =
(AQ x SP) – TAQASP
Materials Yield Variance (MYV) =
TAQASP – Standard Costs
Mix and yield variances may also apply to ____ specifically in situations where various labor skills are required to produce units of products.
direct labor
Materials PRICE variance (MPV) is also known as:
Materials spending variance, materials rate variance, materials money variance
Materials QUANTITY variance (MQV) is also known as:
Materials usage variance, materials efficiency variance
Materials usage variance is a ___ variance while materials price usage variance is a ___ variance.
quantity
price
Labor RATE variance (LRV) is also known as:
Labor price variance, labor spending variance, labor money variance
Labor EFFICIENCY variance (LEV) is also known as:
Labor hours variance, labor usage variance, labor quantity variance, labor time variance
Labor efficiency variance excludes ___ spent in the production. If any, ___ is separately explained through the ____ Variance, which is regarded as unfavorable.
idle time
IDLE TIME variance =
Idle Time x Standard Labor Rate
The term capacity variance is also used to mean the
volume variance.
➢ AFOH > SFOH (applied FOH):
FOH is under-applied, indicating an unfavorable variance
SFOH (applied FOH) > AFOH:
FOH is over-applied, indicating a favorable variance.
Volume variance is actually the ____ variance; there is no such thing as a variable volume or variable capacity variance.
fixed volume
FOH Efficiency Variance is actually the
Variable FOH Efficiency Variance
Other than ‘BAAH – BASH,’
variable overhead efficiency variance may also be computed based on:
Change in hours x variable FOH rate = (AH – SH) VR
Variable FOH Variances =
Variable Spending Variance + (variable) Efficiency Variance
Fixed FOH Variances =
Fixed Spending Variance + (fixed) Volume Variance
IDLE capacity variance:
BAAH – (AH x SR)
TOTAL efficiency variance:
∆H x SR
The Manufacturing Efficiency Variance incorporates the effect of both FOH Efficiency Variance and Labor Efficiency Variance. In some cases, the ____ variance may also be included.
material quantity
Production or Manufacturing Cost Variance =
DM Variance + DL Variance + FOH Variance
PRICE Factor = Sales price variance =
AQ x Δ SP = AQ (Actual SP – Budgeted SP)
COST Factor = Cost price variance =
AQ x Δ CP = AQ (Actual CP – Budgeted CP)
VOLUME Factor =
ΔQ x Budgeted Unit GP = (AQ – BQ) x Budgeted Unit GP
Sales volume variance =
ΔQ x Budgeted SP
Cost volume variance =
ΔQ x Budgeted CP
