Final Accounting 24 Flashcards
What are standard costs?
Predetermined unit costs which companies use as measures of performance?
What are advantages of standard costs?
Facilitate management planning promote greater economy by making employees more cost conscious Useful in settling , selling prices contribute to management control by providing basis for evaluation of cost control useful and highlighting variances in management by exception , simplify costing of internUseful in settling, selling prices contribute to management control by providing basis for evaluation of cost control useful and highlighting variances in management by exception, simplify costing of inventories And reduce clerical costs.
What is the difference between a standard and a budget
Both are predetermined costs.Both contribute to management planning and control
He standard is a unit amount
Ex standard cost cost per unit
.A budget is a total amount
What is?
An ideal standard
Represents an optimal levels of performance under perfect operating conditions.
What are normal standards
Represent efficient levels of performance that are attainable under expected operating conditions
What is the direct materials price standard
Cost per finished unit of product of direct material that should be incurred.
Based on the purchasing department’s best estimate of the cost of raw materialsthe cost is frequently based on current purchase prices. The price standard also includes an amount for related costs such as receiving storing and handling.
What is direct materials quantity standard
The quantity of direct materials that management determines should be used per unit of finished goods
Express as a physical measure such as pounds barrels or board feet
Considers both quality and quantity of materials required to manufacture. The product standard includes allowances for unavoidable waste and normal spoilage.
What is?
The direct labor’s price standard
The rate per hour that should be encured for direct labor
Based on current wages adjusted for anticipatedchanges such as cost of living adjustments
Generally includes employer, payroll taxes and French benefits such as paid holidays and vacations.
What is direct labor quantity standard
The time that management determines should be required to make one unit of the product.
Critical and labor-intensive companies. Allowances should be made in the standard for rest periods. Clean up machine set up and machine downtime.
What is standard predetermined overhead rate
Used for manufacturing overhead.It is determined by dividing Budgeted overhead costs by an expected standard activity indexmaybe direct labor hours or standard machine hours.
What is normal capacity
The average activity output that a company should experience Over the long run
What is the standard cost per unit
The sum of the standard cost of direct materials Direct labor And manufacturing overhead
What are variances
The difference is between total actual costs and total standard costs.
Also, used to indicate differences between total budgeted and total actual cost.
What makes a variance unfavorable
When actual cost exceeds standard cost
It reduces profit.It’s suggests the company pay too much 41 or more of the manufacturing cost components or that it used the components ineffectively
What makes a variance favorable
If actual costs are less than standard costs.
Increases profit and suggests Efficiencies and incurring manufacturing costs and in using direct materials direct labor in manufacturing overhead.
What is total materials variance
Computed as the difference between the amount paid actual quantity times actual price and the amount That should have been paid Based on standards standard quantity times standard price of materials
What is material’s price variance
Computed as the difference between the actual amount paid actual Quantity of material times actual price and the standard amount that should have been paid for the materials used actual quantity of material times standard price.
What is materials quantity variance
Computed as the difference between the standard cost of the Actual quantity actual quantity times standard price and the standard cost of the amount that should have been used standard quantity times standard price for materials
What is a matrix and analyzing a variance
The matrix provides a convenient structure for determining each variance
A company computes the amounts using the equations for each cost component first then Computer the variances
What is total labor variance
The difference between the amount actually paid for labor actual hours times actual rate And the amount that should have been paid standard hours times standard rate for labor
What is labor price variance
Computed as the difference between the actual amount paid actual hours times actual rate and the amount That should have been paid for the number of hours worked actual hours times standard rate for labor.
What is labor quantity variance
Computed as the difference between the amount that should have been paid for the hours worked actual hours times standard rate And the amount that should have been paid for the amount of hours that should have been worked standard hours times standard rate for labor
What is total overhead variance
The difference between the actual overhead cost and overhead costs applied based on standard hours allowed for the amount of goods produced
What are standard hours allowed
The hours that should have been worked for the units produced.
What is a balanced scorecard
Incorporates financial and non financial measures and an integrated system that links performance measurements with a company’s goals
The balance scorecard evaluates Company performance from a series of perspectives Financial customer internal process learning And growth prespectives
what are financial prespectives
the most traditional iew of the company, it employs financial measures of performance used by most firms
what are customer prespectives
evaluates the company from the viewpoints of those people who buy its products or services. this view compares the company to competitors in terms of price, quality, product innovation, customer service, and other dimensions
what are internal process perspectives
evaluate the internal operating processes critical to success. all critical aspects of the value chain including product development, production, delivery, and after- sale service are evaluated to ensure that the company is operating effectively and efficiently
what are learning and growth perspectives
evaluates how well the company developes and retauns its employees. this would include evaluation of such things as employee skills, employee satisfaction, training, programs, and information dissememination
what does a balance score card do
employs both financial and nonfinancial measures
creates linkages so that- high-level corporate goals can be communicated all the way down to the shop
provides measurable objectives for nonfinancial measures such as product quality rather than vague statements such as “we would like to improve quality”
integrates all of the companies goals into a single performance measurement system so that a inappropriate amount of weight will not be placed on any single goal
What is a standard cost accounting system
A double entry system of accounting
Companies use standard costs in making Entries and They formally recognize variances in the accounts
Variances are recognized at the earliest opportunity
Work in progress account is maintained exclusively on the basis of standard costs
What is the overhead controllable variance
Shows weather overhead costs are effectively controlled
Company.
Compares actual overhead costs Incured with budgeted costs for the standard hours allowed
Budgeted costs are determined from a flexible manufacturing overhead budget.
Most controllable variances are associated with variable costs which are controllable costs
Fixed costs are often known at the time the budget is prepared and Are therefore not as likely to deviate from the budgeted amount
Management can compare actual and budgeted overhead for each manufacturing overhead cost that contributes to controllable variance
Management can develop costs and quantity variances for each overhead costs such as indirect Materials and indirect labor
What is overhead volume variance
The difference.
Between normal capacity hours and standard hours allowed times the fixed overhead rate
The overhead volume variance relates to weather Fixed costs were over or under applied during the year
What do you need to remember in computing the overhead variances
Standard hours allowed are used in each of the variances budgetted costs for the controllable Controllable variance are derived from the flexible budget
The controllable variance generally portrays The controllable variance generally pertains to variable costs.to variable costs
The volume variance pertains solely to fixed costs often these volume Variances arise because productivity capacity exceeds what it is needed to satisfy sales. This is usually beyond the control of the product manager.
